Professor Damodaran's Article on Interest Rates and Stock Prices

‌Interest Rates and Stock Prices: An Old Debate Resurfaces!aswathdamodaran.substack.comWhy higher rates don’t always imply lower stock prices
Professor Damodaran from NYU posts articles irregularly on his blog.
The debate he wrote about last week regarding interest rates and stock prices is worth a read.
The short conclusion is:
1. Don't just stare at the Fed. Long-term interest rates are ultimately heavily influenced by economic fundamentals such as expected inflation and real growth.
2. Rising interest rates themselves are clearly bad news for stock valuations. In fact, even in 2026, stocks were weak on days when interest rates rose significantly.
3. However, unlike bonds, stocks do not have fixed cash flows. If corporate earnings increase sufficiently, they can more than offset the higher discount rates caused by rising interest rates.
4. The key reason US stocks endured high interest rates in 2026 was not that interest rates didn't matter, but that corporate earnings outlooks were even stronger.
There are parts I agree and disagree with, but lately, I find myself agreeing with his points.