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Dow Jones Industrial Index Return Rate vs. 10 Year Treasury Rate
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DJIA Return Rate
Simultaneous Change
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DJIA Return Rate
Subsequent Change
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1% Rise in 10 Year Treasury Rate over 1 Year
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1% Decline in 10 Year Treasury Rate in 1 Year
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Industrial Index Return Rate decline during that year and a 0.68% Dow Jones
Industrial Index Return Rate decline the following year.
It also indicates that a 1% 10 Year Treasury Rate decline over a 12 month period,
(from 5% to 4% for example) has typically been accompanied by a 2.75% Dow Jones
Industrial Index Return Rate increase during that year and a 0.03% Dow Jones
Industrial Index Return Rate decline the following year.
The center column shows the change in the Dow Jones Industrial Index Return Rate
over 12 months, depending on whether the period experienced a rising or falling 10
Year Treasury Rate. The right column shows the change in the Dow Jones Industrial
Index Return Rate during the year following an increase or decrease in the 10 Year
Treasury Rate.
The data history in the middle column shows a strong tendency for the two
rates to move inversely to each other during the same time period.
The evidence for using the previous 12 month change in the 10 Year
Treasury Rate to predict the future direction of the Dow Jones Industrial
Index Return Rate is significant (right column). However, the direction of the
rates are inversely related to each other. A change in the 10 Year Treasury
Rate suggests that the Dow Jones Industrial Index Return Rate will move in
the opposite direction of the 10 Year Treasury Rate.
Annual rates are shown in the graph and calculations.
How Do I Use This Information?
There are many investment theories that are well publicized in the financial press.
Even though little or no historical data may be offered as evidence for such theories,
many investors use them subconsciously, if not intentionally.
Example Theories: Rising Inflation is bad for the stock market. A booming housing
market is good for the S&P 500 stock index. A falling fed funds rate means that long
term interest rates will fall.
There are many such theories. In this site, long term investment and economic data
is tested against decades to determine whether a relationship actually exists or not.
This historical correlation provides a vital aid in interpreting the often confusing
behavior of the financial markets. The perspective gained may be the difference
between staying the course or being blown and tossed by every investment theory
that is popular at the moment. What the majority assumes to be true, often is not. In
the final analysis, readers are admonished to follow the evidence, wherever it leads.
This page tests the relationship between the 10 Year Treasury Rate and the Dow
Jones Industrial Index Return Rate. Suppose you are making a business or
investment decision. Suppose again that the decision hinges on whether the 10 Year
Treasury Rate and the Dow Jones Industrial Index Return Rate tend to move in the
same or opposite directions. The data, graphs, and analysis above will enlighten you.
You'll discover whether they move with, inversely to, or independently of each other.
Suppose that the 10 Year Treasury Rate has risen sharply and that you need to know
what direction the Dow Jones Industrial Index Return Rate is headed in the near
future. Does the recent increase in the 10 Year Treasury Rate provide a clue about
the future direction of the Dow Jones Industrial Index Return Rate? The data history,
graph, and analysis above will show you how the Dow Jones Industrial Index Return
Rate has performed after increases in the 10 Year Treasury Rate. You'll see if one
indicator has been likely to signal a change in another. This is not intended as a
prediction, but merely as a clue to the future from the annals of history. No man
knows the future, unless he has the ability to control the future.
This site compares data series for interest rates, stock indexes, economic indicators,
currency exchange rates and real estate values. Suppose that you want to see how
stock indexes are influenced by interest rates or the value of the dollar. Click one of
the stock index links on the right side of any page. Links to our multi-series graphs
and correlation analysis may be found at the bottom-center of the stock index pages.
Formula for periods with a rising 10 Year Treasury Rate:
1) Change in the Dow Jones Industrial Index Return Rate DURING periods with a
rising 10 Year Treasury Rate:
The abbreviated formula is: (Dow Jones Industrial Index Return Rate Change / 10
Year Treasury Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Jones Industrial Index Return
Rate over all rolling 12 month periods with a rising 10 Year Treasury Rate) / (Average
Rise in the 10 Year Treasury Rate over the same 12 month periods)] x 1% =
Published Rate.
2) Change in the Dow Jones Industrial Index Return Rate AFTER a rising 10 Year
Treasury Rate:
The abbreviated formula is: (Subsequent Dow Jones Industrial Index Return Rate
Change / 10 Year Treasury Rate Rise) x 1% = Published Rate.
The complete formula is: [(Average change in the Dow Jones Industrial Index Return
Rate during the 12 months following any rolling 12 month base period with a rising 10
Year Treasury Rate) / (Average Rise in the 10 Year Treasury Rate over the 12 month
base periods)] x 1% = Published Rate.
Formula for periods with a declining 10 Year Treasury Rate:
1) Change in the Dow Jones Industrial Index Return Rate DURING periods with a
declining 10 Year Treasury Rate:
The abbreviated formula is: (Dow Jones Industrial Index Return Rate Change / 10
Year Treasury Rate Decline) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Jones Industrial Index Return
Rate over all rolling 12 month periods with a declining 10 Year Treasury Rate) /
(Average decline in the 10 Year Treasury Rate over the same 12 month periods)] x
-1% = Published Rate.
2) Change in the Dow Jones Industrial Index Return Rate AFTER a decreasing 10
Year Treasury Rate:
The abbreviated formula is: (Subsequent Dow Jones Industrial Index Return Rate
Change / 10 Year Treasury Rate Decrease) x -1% = Published Rate.
The complete formula is: [(Average change in the Dow Jones Industrial Index Return
Rate during the 12 months following any rolling 12 month base period with a declining
10 Year Treasury Rate) / (Average decline in the 10 Year Treasury Rate over the 12
month base periods)] x -1% = Published Rate.
Rolling 12 Month Periods Defined:
Overlapping 12 month periods in a monthly data base.
For example:
In the 24 month period included in 2000 - 2001, there are 13 complete rolling 12
month periods. The first is January, 2000 - December, 2000. The second is February,
2000 - January, 2001. The third is March, 2000 - February, 2001 and so on. The last
complete rolling 12 month period in the 2000 - 2001 period is January, 2001 -
December, 2001.
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