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Fed Model concerns resurface as rates lift challenges for stocks

The article argues that despite higher rates, a bear market has not arrived, questioning how strongly the “Fed Model” should be used to gauge equity risk.

Reported · Written up by our desk · Fund Industry

MarketWatch revisits the so-called “Fed Model,” a framework that links stock valuations to interest rates, and argues that the relationship between rising yields and equity downturns may not be as straightforward as critics suggest.

The piece frames the current debate around whether higher rates are truly enough to end a bull market, noting that if that were the case, investors would have seen a bear market much earlier during previous periods of elevated rate pressure.

MarketWatch also questions how much investors should care about the “Fed Model” turning bearish, positioning the indicator as one that may overstate the likelihood of an immediate equity selloff.

The takeaway is that while rate levels matter for valuations, investors should be cautious about relying on the “Fed Model” as a definitive signal for market-wide turns.

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