Should equity investors be concerned about rising rates?

The 10-year Treasury yield rose from 0.62% on April 30, 2020, to 1.74% as of March 31, 2021. Some investors worry that higher rates will hurt equity prices. Should equity investors be concerned?

As shown in the following table, the 10 largest rising rate periods over the last 40 years, equity markets performed remarkably well. The S&P 500® Index delivered positive returns in all 10 periods and averaged a 13.9% return. Small-caps tended to perform even stronger, with the Russell 2000® Index outperforming the S&P 500 Index in seven of those periods.

Equity market return during the 10 largest rising rate periods over the last 40 years

Chart source(s): FactSet, YCharts.
Past performance does not guarantee future results.
Investing involves risk, including the possible loss of principal.

What this means for investors

While rising rates present another risk for investors to consider, historical evidence has shown that equity markets have been unfazed by interest rate rises. We believe the United States is at the beginning of a new economic cycle, which tends to be favorable for equity investments.


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Investing involves risk, including the possible loss of principal.

Past performance does not guarantee future results.

Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.

The views expressed represent the investment team’s assessment of the market environment as of March 2021, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice.

The Russell 2000 Index measures the performance of the small-cap segment of the US equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index, representing approximately 10% of the total market capitalization of that index.

The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market.

Charts shown throughout are for illustrative purposes only and not meant to predict actual results.

Chart is for illustrative purposes and is not representative of the performance of any specific investment.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.