Rising bond yields have been a key catalyst for stock drawdowns over the past year.
But as the market shifts to expect that interest rates may remain higher than the previous decade for longer than many initially hoped, BMO chief investment strategist Brian Belski notes that higher rates haven’t always been a bad enviornment for stocks.
In an analysis spanning back to 1990, Belski found the the S&P 500’s monthly return has actually delivered its best annualized average returns when the 10-Year treasury yield (^TNX) was higher.
Belski’s work shows the benchmark average delivered an average annual return of 7.7% in months where the 10-year Treasury yield was less than 4%, compared to an average annual return of 14.5% in months when the 10-year was 6%.
“In a higher interest rate environment, certainly higher than 0% to 1% or 0% to 2%, stocks traditionally do very well,” Belski said. “So I…
