Matthias Knab, Opalesque:
Rising Rates Open New Vistas for Stock Pickers
AllianceBernstein writes on Harvest Exchange:
Rising rates are typically good for stocks, especially when they're rising because of a strengthening economy. That should mean better days ahead for many postcrisis laggards. But a lot will depend on how inflation behaves.
After a series of head fakes, interest rates and potentially inflation appear to be coming out of their funk. Governments across the globe are shifting from monetary to fiscal stimulus to reinvigorate growth, with the US at the forefront. An array of proposed pro-business policies from the new US presidential administration-including lower corporate taxes, repatriation of cash held offshore and looser regulation-has lifted confidence in US and, in turn, global growth.
So what does all this mean for stocks? Each rate cycle has been unique, but history can give us clues to what may lie ahead.
As we wrote in the wake of the 2013 Taper Tantrum, stocks generally thrive when rates rise . Surprisingly, during the 17 bouts of rising 10-year US Treasury bond yields since 1970, our updated research shows that large-cap global stocks rose 17.4% annualized, outperforming their long-term annualized average gain by more than eight percentage points.
Rising-Rate Champions
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