# Aswath Damodaran revisits how interest rates affect stock prices [Canonical reading](https://escapemeridian.com/readings/aswath-damodaran-revisits-how-interest-rates-affect-stock-prices-fa60bfc2) Aswath Damodaran’s post, published September 10, 2026, argues that rising interest rates do not affect all stocks in the same way. He says the effect depends on why rates rise and how that changes a company’s revenues, costs, earnings and reinvestment, as well as the higher discount rate used to value future cash flows. Damodaran reports that US Treasury rates rose during 2026, while US equity indexes rose through the first eight months of the year. He argues that stronger earnings helped support stock prices, even as shares tended to do worse on days when Treasury yields rose sharply. Those observations describe the period he examined; they do not establish how rates or stocks will move next. His account offers a way to understand why a rise in rates may weigh differently on different companies and sectors. The post also notes uncertainty about the earnings estimates, including how companies account for AI. What evidence will show whether earnings growth can continue to offset the pressure of higher rates? Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims. ## Original source Aswath Damodaran · Article Original source date: Sep 10, 2026 (2026-09-10T12:37:37.212-04:00). Date basis: Date supplied by the publisher’s feed. Added to Escape Meridian: 2026-10-29T17:09:12.721Z. First observed: 2026-10-23T19:49:45.021Z. Retrieved: 2026-10-23T19:51:36.907Z. - [Interest Rates and Stock Prices: An Old Debate Flares up!](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Limits Text as retrieved on October 23, 2026; originally published September 10, 2026. The page is marked as edited after publication, so the retrieved text may include later additions; the evidence does not identify which passages, if any, were added. ## Open question What evidence will show whether earnings growth can continue to offset the pressure of higher rates? ## Source-stated Damodaran argues that interest-rate increases can affect stock values differently because rates can change both discount rates and companies’ expected cash flows. > With stocks, the effect of higher interest rates is not as direct for a simple reason. The expected cash flows on stocks are the residual cashflows from operations at businesses - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source-stated Damodaran reports that US Treasury rates rose during 2026, while US equity indexes rose over the first eight months of the year. > As US treasuries have risen in 2026, US equity indices have, for the most part, taken that increase in stride, with the S&P 500 and NASDAQ both rising strongly over the first eight months of the year - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source-stated Damodaran says analyst estimates for S&P 500 earnings increased, and describes earnings as a reason stocks held their ground during 2026. > Over the first eight months of 2026, analysts who track the S&P 500 companies have raised their estimates for corporate earnings by more than 11% for both 2026 and 2027 - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Escape Meridian interpretation Escape Meridian reads Damodaran’s account as a framework for comparing how interest-rate changes may affect companies differently, rather than as a uniform forecast for stock prices. > The effects of higher interest rates will therefore vary across companies, with some companies seeing decreases in value - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source and contributor context Aswath Damodaran · Publisher The publisher is identified here. No individual author has been inferred. ## Source media Media retrieval status: unchecked. ## Terms and references Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement. ## Editorial provenance Version 1. Publication ID: 00ba2516-9c49-dfe9-af89-cea4b531a3c6. Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5. Source check: passed by anthropic/claude-opus-5.5 on 2026-10-29T17:07:38.230Z. This checks fidelity to the source, not whether its claims are independently true. Editorial selection: accept; reasons: bridge\_admitted\_by\_model. Observation: 4b028e32912beb69d4e08e00da33b8ddfb4b4db55f4d4741b3ed342bfcdecbb1. Source text hash: 972f055cbcc72d85fdc3f13897fd91a993c3a3b6cf2beefae50529d1dc4ae686. ## Revision and source-check history ### Version 1 — 2026-10-29T17:09:12.721Z Aswath Damodaran’s post, published September 10, 2026, argues that rising interest rates do not affect all stocks in the same way. He says the effect depends on why rates rise and how that changes a company’s revenues, costs, earnings and reinvestment, as well as the higher discount rate used to value future cash flows. Damodaran reports that US Treasury rates rose during 2026, while US equity indexes rose through the first eight months of the year. He argues that stronger earnings helped support stock prices, even as shares tended to do worse on days when Treasury yields rose sharply. Those observations describe the period he examined; they do not establish how rates or stocks will move next. His account offers a way to understand why a rise in rates may weigh differently on different companies and sectors. The post also notes uncertainty about the earnings estimates, including how companies account for AI. What evidence will show whether earnings growth can continue to offset the pressure of higher rates? ## Original source Aswath Damodaran · Article Original source date: Sep 10, 2026 (2026-09-10T12:37:37.212-04:00). Date basis: Date supplied by the publisher’s feed. Added to Escape Meridian: 2026-10-29T17:09:12.721Z. First observed: 2026-10-23T19:49:45.021Z. Retrieved: 2026-10-23T19:51:36.907Z. - [Interest Rates and Stock Prices: An Old Debate Flares up!](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Limits Text as retrieved on October 23, 2026; originally published September 10, 2026. The page is marked as edited after publication, so the retrieved text may include later additions; the evidence does not identify which passages, if any, were added. ## Open question What evidence will show whether earnings growth can continue to offset the pressure of higher rates? ## Source-stated Damodaran argues that interest-rate increases can affect stock values differently because rates can change both discount rates and companies’ expected cash flows. > With stocks, the effect of higher interest rates is not as direct for a simple reason. The expected cash flows on stocks are the residual cashflows from operations at businesses - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source-stated Damodaran reports that US Treasury rates rose during 2026, while US equity indexes rose over the first eight months of the year. > As US treasuries have risen in 2026, US equity indices have, for the most part, taken that increase in stride, with the S&P 500 and NASDAQ both rising strongly over the first eight months of the year - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source-stated Damodaran says analyst estimates for S&P 500 earnings increased, and describes earnings as a reason stocks held their ground during 2026. > Over the first eight months of 2026, analysts who track the S&P 500 companies have raised their estimates for corporate earnings by more than 11% for both 2026 and 2027 - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Escape Meridian interpretation Escape Meridian reads Damodaran’s account as a framework for comparing how interest-rate changes may affect companies differently, rather than as a uniform forecast for stock prices. > The effects of higher interest rates will therefore vary across companies, with some companies seeing decreases in value - [Supporting source](https://aswathdamodaran.blogspot.com/2026/09/interest-rates-and-stock-prices-old.html) ## Source and contributor context Aswath Damodaran · Publisher The publisher is identified here. No individual author has been inferred. ## Source media Media retrieval status: unchecked. ## Terms and references Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement. ## Editorial provenance Version 1. Publication ID: 00ba2516-9c49-dfe9-af89-cea4b531a3c6. Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5. Source check: passed by anthropic/claude-opus-5.5 on 2026-10-29T17:07:38.230Z. This checks fidelity to the source, not whether its claims are independently true. Editorial selection: accept; reasons: bridge\_admitted\_by\_model. Observation: 4b028e32912beb69d4e08e00da33b8ddfb4b4db55f4d4741b3ed342bfcdecbb1. Source text hash: 972f055cbcc72d85fdc3f13897fd91a993c3a3b6cf2beefae50529d1dc4ae686. ### passed — 2026-10-29T17:07:38.230Z — anthropic/claude-opus-5.5 Publication: 00ba2516-9c49-dfe9-af89-cea4b531a3c6 attribution — pass: The reading attributes the post and its arguments to Aswath Damodaran, who is the publisher and author of this blog post. Reported figures and arguments are framed as his, and the framework reading is labeled as Escape Meridian interpretation. > I also intend to revisit a discussion that I initiated in 2022, when interest rates were the central act in markets, about the relationship between interest rates and stock prices summary — pass: The title, summary and question match the post's central argument. Higher rates affect stocks unevenly because both discount rates and cash flows change. In 2026, rising Treasury yields coincided with rising indexes, which he attributes to earnings revisions. Discount rate is explained in plain terms, and the AI earnings caveat is reflected. The question follows from the source's stated uncertainty about earnings and is not leading. > The secret to equity resilience in the face of higher oil prices, interest rates and political turmoil has been in equity earnings, which have surged over the course of 2026. date — pass: originalPublished is 2026-09-10T12:37 -04:00, which is September 10 in UTC, and the reading states September 10, 2026. Nothing is presented as happening after that date, and there is no hindsight framing. The upcoming FOMC meeting is not treated as an outcome. This is a publisher page, not an archive copy. The page was edited after publication, but the passages the reading relies on are integral parts of the article body, and the limitations disclose the edit. > the Federal Open Market Committee (FOMC) meeting coming up in mid-September looms larger than ever support — pass: Each claim is supported by its excerpt. That includes rising yields alongside rising indexes, the analyst estimate increase above 11%, worse stock returns on days with large yield rises, and uncertainty about AI's effect on reported earnings. The interpretation is labeled and grounded. The cited passages are plainly part of the original analysis, not apparent later additions. No unsupported benefits or forecasts are implied. > I know that you have questions about these earnings, and I do as well, especially in the context of how companies are reporting the effects of AI on their earnings media — pass: No media was selected, and no verified media candidates were supplied. Selecting none is appropriate. ## Recorded references Explicit citations in public readings and public file attachments to this reading. Shared topics are not citations. Other artifact types need an explicit reference adapter. No public references recorded here yet. [Reference data (JSON)](/readings/fa60bfc263c5d383ec39e0a355efe7a2db635d268aa9d147023de53b30cc9b9f/references.json) ## Corrections and challenges [Send a correction or an opposing source](https://escapemeridian.com/corrections/) [JSON record](https://escapemeridian.com/readings/aswath-damodaran-revisits-how-interest-rates-affect-stock-prices-fa60bfc2.json)