Interest Rates High, Stocks Don’t Budge
(Jeffrey Carter) – Over the past several days, I have been chatting with friends from both the right and left sides of the political aisle.
Like me, they have been involved in markets for their entire careers. We are all 60+ now and started when we were 21. We have seen a lot in our lives.
The rule of thumb is that when inflation goes up and interest rates go up, stocks go down.
That’s not happening, and no one can figure it out.
I have been pretty busy up at my lake place the past couple of months, so I haven’t had time to delve deep into the market, but as a long-time practitioner, when something seems out of line and it’s not falling into line the way you expect, then your personal framing has got to be wrong. We are closing and starting our trek home to Nevada on Wednesday.
This is when you hear the line, “The market can remain irrational longer than you can remain solvent.”
That actually means, “The stupid market isn’t doing what I expected, but I won’t admit I am wrong.”
Here are a couple of charts. First, Fed Funds rate
Second, S+P 500 and QQQ over the last three months.
Third, Crude Oil. Guess when the action in Iran started.
Crude oil is the second-largest input into production. Labor costs are the first.
If we look out to where crude oil futures are trading six, eight, nine months from now, oil is roughly $76/bbl.
That’s not cheap, but it means diesel/gas prices are going to drop within the year.
The Fed raised rates, and when you look at Fed Funds futures, they are pricing in one more quarter-point hike in rates.
The swaps market is showing there might be more hikes, but as a trader I like to be contrarian, and I would be willing to take the other side of that trade.
As my friend Rick Santelli said on CNBC the other day, “rates were artificially kept at 0% for YEARS, so seeing the ten-year at slightly over 5% isn’t a huge deal in the long run and when you take in a historical perspective.”
The other thing to remember is it is not just $40 trillion in American debt driving interest rates, but it is private demand for money to expand operations.
American companies are sensing and seeing opportunities, and they are borrowing cash or raising cash to seize them.
So why isn’t the market tanking?
I think there are a few reasons. First, the crude market is pricing in an end to the actions in the Strait of Hormuz.
Already, oil is flowing. The American Navy has stemmed a lot of the violence and potential violence.
I think if it were to end, we’d see oil drop to around $55/bbl.
Second, I don’t think inflation is as bad as the mainstream media wants it to be.
It’s over 3% and needs to be closer to 2%. Raising rates isn’t going to cure inflation. Cutting government spending will.
The American economy is the most efficient in the world. It’s able to absorb shocks to the system and distribute the costs so consumers don’t feel it as badly as you might think.
The “sky is falling” people have turned their fear from eggs to beef now that eggs are cheap again.
Third, there is just a gigantic investment happening in everything surrounding artificial intelligence. That’s positive for stocks.
Hand in hand with that investment is innovation, development, and adoption of artificial intelligence into daily processes.
AI engines have made so much progress in the last few months. That was unfathomable a year ago. Technology has never seen something go so fast.
That progress is being integrated into processes and creating more opportunities for the companies and people who embrace it.
You can hate Trump all you want; the market isn’t dropping because of your hate. Just like it didn’t drop when we hated Obama. If you are bearish and want some bear porn, here is a link.
If the socialists grab real actionable political power in the midterms, we are in for a different fate. Read my old pal Leo’s post on Socialism.
Right now, running American cities into the ground isn’t enough to derail the train.
I don’t think we have a runaway bull market. I don’t think we have a bear market.
I think it’s an opportunistic one.
Sometimes buying an index, sitting on your hands, and not even paying attention to the market is the best strategy.
I think we have a steady market that is pretty dull. The other thing old traders used to say: Never sell a dull market.
You might be right for a day or two, maybe even a week. Not for the long haul, though.
This article was originally published via JeffreyCarter.substack.com on 9/27/2026. The opinions expressed by contributors are their own and do not necessarily represent the views of Nevada News & Views. Digital technology may have been used in the research, writing, or production of this article. Please verify information and consult additional sources as needed.
