ACTV - Stocks Can Rise Even With Higher Rates

2024-05-08 13:25:00 ET

Summary

• YTD, U.S. stocks are off to a strong start, while bonds have struggled. Historically, rising rates have led to a pullback in stocks.
• This year, stocks are proving more resistant to higher rates due to a few key factors. If this continues, stocks may gain from here.
• To the extent rate gains are modest and occur against the backdrop of a strong economy, I think stocks can end the year higher. With this backdrop, I would advocate investors maintain an overweight to equities.

Originally published on April 15, 2024

Stocks are having another good year, bonds less so. During the first quarter, U.S. equity markets, as measured by the S&P 500, added another 10% to last year’s stellar gains, while most bond indices lost ground. Year-to-date, the Barclays Aggregate Bond Index is down -1% and long-dated U.S. government bonds are off by roughly 3%. This leaves the question: Can stocks continue to advance in the face of higher rates? I believe they can....

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