For many investors, the fact that stock prices and interest rates are inversely correlated is a mystery. We've seen this over the last 13 months, as the S&P 500 (SNPINDEX: ^GSPC ) soared in response to the Federal Reserve's third round of quantitative easing.
But once you consider the impact that lower interest rates have on both business expenses and consumer spending, it all becomes clear.
Retail companies are at the forefront of this. As I discuss in the video below, when interest rates go down, companies like Wal-Mart (NYSE: WMT ) , Target (NYSE: TGT ) , and Costco (NASDAQ: COST ) benefit from a corresponding rise in disposable income. All else being equal, when their customers get richer, so do they.
The three companies that are ready to rule retail
The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only those most forward-looking and capable companies will survive, and they'll handsomely reward those investors who understand the landscape. You can read about the "3 Companies Ready to Rule Retail" in The Motley Fool's special report. Uncovering these top picks is free today; just click here to read more.