A Simple Model to Track the Long-Term Trend in Interest Rates

Key points:

• Interest rates can trend in one primary direction for long periods of time (think decades)
• Understanding whether the current trend is up or down can have important implications for stock market and personal finance-related decisions
• Several simple indicators do a very good job of helping investors to identify the current primary trend in interest rates objectively
• The JK Interest Rate Trend Model is designed to answer one question: "Are interest rates in a long-term rising or falling trend right now?"

NOTE: I am working with our programming team to add a variety of my own indicators/models to the website. The model detailed in this note is referred to as the JK Interest Rate Trend Model (JIRTM). This model is not currently on the website, but I hope to add it in the near future. Because it is extremely long-term in nature, it is unlikely to generate a new signal in the foreseeable future, so I have decided to write about it now rather than wait for its official addition to the website. This ridiculously simple model combines two long-term trend measures to designate the current long-term trend for interest rates as rising or falling (or, on occasion, no trend). Note that the model is NOT an attempt to "predict" the future trend, nor any impending trend change. Fortunately, because long-term interest rate trends can last for decades, knowing the trend today is valuable.