Musings on Markets: Interest Rates, Earning Growth and Equity Value

The article analyzes how rising treasury rates in Q1 2021 affect equity valuations through both direct (discount rate) and indirect (growth expectations, inflation, margins) mechanisms. The author argues that rate increases driven by real economic growth have positive effects on stock prices, while inflation-driven increases are damaging, and demonstrates how these effects vary significantly across the corporate life cycle, with growth companies more severely impacted than mature firms.