Rising Rates: What’s the Impact on Investment Portfolios?

Apr 23

In 2019, the Federal Reserve began to cut the Fed Funds rate for the first time since the Global Financial Crisis, as the economy showed some signs of sluggishness. This resulted in long-term rates slowly but steadily dropping as well. In early 2020, the Federal Reserve acted quickly to attempt to aid the economy by slashing the key Fed Funds rate to the zero bound and beginning bond purchases to inject liquidity into the markets. The 10-year U.S. Treasury hit historic lows by August.

The Fed has repeatedly stated it is committed to maintaining the Fed Funds rate at its current level and will continue bond purchase programs until the recovery is firmly established. However, beginning in early 2021, good news about vaccines, stimulus and strong economic data has created a surge in longer-term rates, in anticipation of a rapidly strengthening economy. While rates may not increase as rapidly as we’ve... ...