This helps highly leveraged companies by reducing interest outlays. Lower rates help stimulate demand for traditional, interest sensitive economic sectors - for which residential housing is one key and visible component. Focus on Dividends. Clearly, higher-yielding stocks with reasonable growth prospects benefit from investors seeking higher yields than they are getting from savings accounts. Higher Asset Values.
Lower rates bolster the values of assets.
Let's take a look at one model that highlights this relationship. Among the ways to value stocks is with a dividend discount model. Here, the key variable is the growth rate in dividends. As interest rates decline, the rate of return an investor requires drops as well, because returns on alternative investments have fallen. Holding all else constant, a drop in the required rate of return will increase the value today of a future stream of dividends.