WiseTech valuation on company provided guidance, page-157

It may be the case that higher interest rate expectations have lowered WTC valuation. I am not 100% sold on it, though. These expectations have been around now for a number of weeks; and could easily be one of those fallacies (ergo hoc post propter hoc).

Below is lifted (with thanks) from Blackrock:

A complicated relationship

It is true that there have been historical periods, notably the ’70s and early ’80s, when higher rates coincided with lower valuations and poor returns. That said, the relationship between rates and stocks changes when rates are very low. At current levels the relationship between interest rates and valuations has been more ambiguous. At least historically, stock valuations have been more likely to rise than fall when rates are rising from low levels, as is the case today.

This tendency can also be seen when comparing changes in rates to changes in stock prices. Since 1995, in months when the U.S. 10-year treasury yield rose by more than 50 basis points (bps), over the following three months the S&P 500 posted a price gain of 3.2%, roughly 100 bps higher than a typical month.

The case for stocks and rates moving together is even stronger when comparing valuations to real interest rates, i.e. rates minus inflation expectations. Looking at data since the inception of the Treasury Inflation-Protected Security (TIPS) market, real rates and equity multiples typically have a strong positive relationship (see Chart 1). In other words, higher real rates have been associated with higher multiples. Based on this relationship you would expect a 50 bps rise in real rates to be associated with equity multiples moving up by one point. While real life is unlikely to conform exactly to the model, the relationship illustrates that real rates and multiples generally move together.

U.S. Real 10-Year Yields and Equity Valuations
1997 to 2020

Source: Bloomberg, as of December 31, 2020.