There are two regimes for the correlation between long-term interest rates and stock market indices: The growth and risk aversion regime, the liquidity and inflation regime

In the growth and risk aversion regime, a rise in growth and a fall in risk aversion lead to a rise in long-term interest rates and in stock market indices (all signs can be reversed if growth declines and risk aversion rises). In this regime (growth and risk aversion), changes in long-term interest rates and in stock market indices are therefore positively correlated. In the liquidity and inflation regime, an increase in liquidity associated with a fall in expected inflation drives down long-term interest rates and drives up stock market indices (conversely, a rise in expected inflation would lead to a contraction in liquidity, a rise in long-term interest rates and a fall in stock market indices). In this regime (liquidity and inflation), changes in long-term interest rates and in stock market indices are therefore negatively correlated. We then seek to determine which regime dominates at different times in the United States and the euro zone. We see that normally: The growth and risk aversion regime appears in recessions and at the beginning of growth periods; The liquidity and inflation regime appears in the second part of growth periods . Today, we saw the growth and risk aversion regime from January 2020 to March 2021, but since April 2021 we have returned to the liquidity and inflation regime, probably because of the expansionary characteristics of monetary policies.