It’s been worrying investors for the last few years, especially over the last couple of weeks – rising rates. The narrative is simple: rising rates are bad for stocks. When rates rise, sell stocks.
Here’s why investors are worried. US 10-Year Treasury yields are reaching levels we have not seen since 2013.
Source: Thomson Reuters
The data however suggests otherwise. In fact, right up until the 10-Year yield gets up to about 5%, stocks and bonds yields historically have been positively correlated. History tells us that it’s perfectly normal for rates and stocks to rise at the same time.
Here’s a great chart by JP Morgan highlighting the correlation between stocks and interest rates since 1963.
Here’s another vantage point:
Don’t be fooled however. Rising rates from higher levels is a problem for stocks. We’re just not there yet.