Insurance: A Rare Winner from Higher Interest Rates?17/8/2023 It’s a common investing belief that higher interest rates are a negative for stocks. As the world’s most famous investor Warren Buffett creatively described at the Berkshire Hathaway (NYSE: BRK.B) 2013 annual general meeting, “Interest rates are to asset prices, you know, sort of like gravity is to the apple.” Buffett’s argument was that as interest rates rise, there is a “gravitational pull” on the value of stocks. The reason for this is that investing is a relative endeavour. The value of one investment is always relative to the other opportunities that an investor can make at any given time. The argument then goes that as interest rates rise, stocks become relatively less attractive compared with bonds and other fixed interest investments, for example. However, it’s not entirely true that all investments perform poorly in a higher interest rate environment–Berkshire Hathaway included!
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