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Macro Basics ① — Interest Rates and Risk Assets

Macro Basics ① — Interest Rates and Risk Assets education card 1

The same images as the education cards published to the Telegram channel.

RatesRisk assetsRising rates work against risk assets
The direction of interest rates sets the appetite for risk assets

Key point

• The policy rate is the 'price of liquidity' — when rates rise, valuations of risk assets are pressed down

Why

• When rates are high, even safe assets pay returns, so the reason to take risk shrinks and money leaves

• That is why the direction of rates creates the large flow (the cycle)

Where people slip

• They look only at the chart without knowing the direction of rates — and miss the large flow

Behind the chart sits a backdrop called interest rates. The direction is confirmed first.

Before looking at a chart, do you check the direction of interest rates (the liquidity backdrop)?

Previous lessonAdvanced Risk ⑥ — Managing Leverage in StagesNext lesson Macro Basics ② — How to Read a CPI Release

More in this category — Cryptocurrency

Macro Basics ② — How to Read a CPI ReleaseMacro Basics ③ — Employment Indicators and Market ReactionMacro Basics ④ — The Dollar Index and BTC

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Macro Basics ① — Interest Rates and Risk Assets — MarketSurfer Trading Education