Very low ( historically low rates) force investors and fund managers into stocks opposed to other assets. Those searching for yield were only going to find it in stocks. That is what really propelled this market. Get 3 1/2% in a checking account and watch what happens to the stock market.
Another thing to look at are long term bonds. If short term rates go up and long term rates start falling, thats a very ominous sign ( inverted yield curve).
No matter how bad we think things will get, you will always make money buying stocks when everyone is in panic mode. Same with real estate.
No one really has to buy a stock. What happens is money becomes cheaper to rent, and when corporations begin doing so, stock valuations begin to rise because growth is portended by analysts. That rising valuation causes specialists to raise the bid and the ask, Before you know it, "the market" is forcing stocks up due to the power of supply and demand for a security. But it didn't begin with supply and demand (for a stock).
If there is a "pressure" to move into stocks and out of government securities due to falling interest rates, it is because a manager of millions or billions of dollars cannot justify to his employers and investors his investing their money into securities with low and lower interest rates. So his job security relies on him moving into a higher yield vehicle.
All of that said, I think we agree on your post. I just love breaking it down.
I think the inverted yield curve might be a sell signal because if long term corporate bond yields are going down, that means the face value is up, which means the big money is buying corporate bonds and foreseeing a market correction in the longer term.
