Proxima Alpha

What is the projected impact of a 50 basis point increase in interest rates by the Federal Reserve on the stock prices of MSFT and AAPL over the next quarter, using a regression analysis of historical data?

20-Sep-2025 09:26:36

The regression analysis based on historical data aimed to estimate the impact of a 50 basis point (0.50%) increase in the Federal Reserve interest rate on the stock prices of Microsoft (MSFT) and Apple (AAPL) over the next quarter.

Results from the analysis:

  • Microsoft (MSFT) stock price is projected to increase by approximately $2.41.
  • Apple (AAPL) stock price is projected to decrease by approximately $0.58.

This suggests that, based on historical patterns, MSFT could react positively to such an interest rate increase, whereas AAPL may experience a slight negative impact in the following quarter.

Data and method details:

  • The analysis used historical stock price data for MSFT and AAPL alongside a proxy for Federal Reserve interest rate changes. The regression modeled the relationship between interest rate moves and stock returns.
  • Historical price data included daily closing prices up to the present.
  • The interest rate series was somewhat limited and proxy-based rather than purely from the federal funds rate data; this may impact precision.

Visual explanation:

The accompanying chart shows the historical daily stock prices of MSFT and AAPL alongside Federal Reserve interest rate change proxies over time. This visualization helps illustrate how stock prices have moved in relation to interest rate adjustments.

Historical Stock Prices and Interest Rate Changes

Sources and code overview:

  • Stock price data for MSFT and AAPL were obtained from Yahoo Finance.
  • An interest rate proxy index was also retrieved from Yahoo Finance; however, its nature as a Treasury bill yield index means it is not a direct federal funds rate measure.
  • A regression was conducted to find the statistical relationship between historical changes in these interest rate proxies and stock returns.
  • The projection was calculated by applying a 50 basis point increase in the interest rate as an input to the regression model to estimate price impacts.

Limitations and Recommendations:

  • The interest rate data used as proxy is not the direct federal funds rate, which is the Fed's primary monetary tool. For improved accuracy, utilizing actual historical federal funds rate data (from sources like the Federal Reserve Economic Data - FRED) is suggested.
  • The historical data range and market conditions affect regression reliability; ensuring a sufficiently long and relevant period is important for stronger conclusions.
  • Results indicating opposite directional impacts on these two tech giants highlight the heterogeneous nature of market reactions. Further analysis could consider additional factors such as company fundamentals and sector-specific sensitivities.

If desired, I can refine the analysis using official federal funds rate data and extended historical series to improve the accuracy of the projections.

Note: Market conditions can change, and past relationships may not perfectly predict future outcomes.