What Investors Misunderstand About Rising Rates

Shutterstock photo
What Investors Misunderstand About Rising Rates

(New York)

The whole market is generally afraid of rising rates. Both in 2015 and 2018, there were significant mini-meltdowns about the prospect of aggressive rate rises. One of the aspects that most worries investors is that higher rates will drive participants out of stocks and into higher-yielding bonds. However, while true in some respects, that narrative is far too simple. Higher rates are a symptom of a healthy and growing economy, which means the business fundamentals driving stocks are getting better, a factor which is likely far more important than incremental changes in rates.

FINSUM : We think there is some wisdom in these words, especially as they perfectly encapsulate what has happened with the market this year.

  • bonds
  • rates
  • yields
  • fed
  • economy

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Bonds

More from FINSUM




Research Brokers before you trade

Want to trade FX?