April 26, 2021
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.