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Matthias Knab, Opalesque: Legg Mason Global Asset Management writes on Harvest Exchange:
Overall, fixed income delivered positive results during the past three Federal Reserve rate tightening cycles.
With the Federal Reserve (Fed) having increased its target rate in December 2015 and again in December 2016, investors are wondering how may hikes to expect in 2017. The Fed's statement following its December 2016 FOMC meeting suggested three hikes could be in store for next year. Of course, much will depend on how the economy actually performs. Consider that after increasing rates in December 2015, the Fed initially implied that four rate hikes were possible in 2016 -- a prediction that did not pan out.
Still, if we are actually on the cusp of an extended Fed tightening cycle, fixed-income investors are certainly interested in how it could impact their portfolios. A look back at history provides some perspective for investors that suggests there may be benefits to staying put and "riding out" the cycle, instead of rushing for the exits or pursuing a market-timing strategy.
Surprising performance
Indeed, an analysis of representative index performance provides interesting insight into what investors might expect when interest rates are rising.
In the three most recent Fed tightening cycles (1994-1995, 1999-200...................... To view our full article Click here
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