Low interest rates clearly boost corporate profits. The inverse relationship is evident from the strong profits recorded in the 1950s, when corporate bond rates were lower than at present, and also the big hole in profits in the 1980s, when interest rates spiked dramatically during Paul Volcker’s reign at the Fed.
The outlook for inflation is muted and the rise in interest rates likely to be gradual over several years, rather than a sharp spike, if the Fed has its way.
I would not draw that conclusion form the chart. The excellent compensation /profit chart in your explains much of the variation in profit other email .
Also corp bonds are of long maturity so change in long term rates take some time to have their full effect. I think the interest rate /profit chart should be ignored unless a multi factoral analysis is being done.
PS The negative real interest rates on corp cash balances area negative impact of low interest rates on profits
PPS Thanks for all your posts.
Thanks Graham
Rising interest rates affect sales of durable goods and increase the cost of debt funding.