In an April 23 Associated Press article, Duane McAllister, Senior Portfolio Manager with Baird Advisors, discussed rising bond yields.
Since the global financial crisis in 2008-09, a combination of low inflation expectations and a bond-buying program by the Federal Reserve have helped keep bond yields low. That pushed stocks higher by making bonds less appealing in comparison. With the Fed no longer buying bonds and investors expecting greater inflation, higher yields could make bonds more attractive.
Duane McAllister, senior portfolio manager for Baird Advisors, said he doesn't think rising yields are a problem for the stock market. He said they are an opportunity for investors to diversify their holdings at a time of increased market volatility.
“Three percent is an important milestone on the continued trend toward higher interest rates,” he said. “It shouldn't lead anyone, whether you're an individual investor or an institutional investor, to run for the hills.”
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Past performance is not indicative of future results and diversification does not ensure a profit or protect against loss. All investments carry some level of risk, including loss of principal. In a rising interest rate environment, the value of fixed-income securities generally decline and conversely, in a falling interest rate environment, the value of fixed income securities generally increase. High yield securities may be subject to heightened market, interest rate or credit risk and should not be purchased solely because of the stated yield. Ratings are measured on a scale that ranges from AAA or Aaa (highest) to D or C (lowest). Investment grade investments are those rated from highest down to BBB- or Baa3.