Prior long-term periods of increasing interest rates by themselves have dropped stock prices as P/E ratios have declined. Present value analysis argues that high long term interest rates as we’ve been experiencing drives down the present value of long-term corporate earnings which, in turn, drops the P/E ratios across the stock market. Several periods are referred to in this podcast have witnessed P/E drops of approximately 50% during decades of interest rate increases. If the lower P/E is coupled with a weak stagflationary economy we have a double set of red flags for stock prices.