{"id":7294,"date":"2023-08-21T14:40:37","date_gmt":"2023-08-21T20:40:37","guid":{"rendered":"https:\/\/www.keystonefinancial.com\/?post_type=oi_article&p=7294"},"modified":"2023-08-22T14:46:42","modified_gmt":"2023-08-22T20:46:42","slug":"market-commentary-august-21-2023","status":"publish","type":"oi_article","link":"https:\/\/www.keystonefinancial.com\/articles\/market-commentary-august-21-2023","title":{"rendered":"Market Commentary | August 21, 2023"},"content":{"rendered":"\n
Higher bond yields may be good for income investors \u2013 and not so good for stock markets.<\/p>\n\n\n\n
After more than a decade of near-zero interest rates, the \u201cfree money\u201d era \u2013 a time when people and businesses could borrow money and repay it with very low (or no) interest \u2013 may be over.<\/p>\n\n\n\n
Last year, rising inflation caused the Fed to begin raising the federal funds rate aggressively. Yields on bonds moved higher, too. At the end of last week, the yield on a one-year U.S. Treasury bill was 5.35 percent, up from only 0.40 percent at the start of 2022.<\/p>\n\n\n\n
Many people thought rates and bond yields would come back down relatively quickly, but that school of thought is changing, reported Michael Mackenzie and Liz Capo McCormick of Bloomberg<\/em>.<\/p>\n\n\n\n \u201cAll around the world, bond traders are finally coming to the realization that the rock-bottom yields of recent history might be gone for good\u2026The surprisingly resilient US economy, ballooning debt and deficits, and escalating concerns that the Federal Reserve will hold interest rates high are driving yields on the longest-dated Treasuries back to the highest levels in over a decade. That\u2019s prompted a rethink of what \u2018normal\u2019 in the Treasury market will look like\u2026strategists are warning investors to brace for the return of the \u20185% world\u2019 that prevailed before the global financial crisis.\u201d<\/p>\n\n\n\n Higher bond yields may be good news for income-oriented investors who turned to dividend-paying stocks for income when bond yields were low. Now, those investors may be able to earn attractive yields with lower-risk Treasuries, reported Al Root of Barron\u2019s<\/em>.<\/p>\n\n\n\n It\u2019s not such great news for stock markets, though. \u201c\u2026rising Treasury yields are a problem for stocks because investors will rotate out of riskier equities and into less-risky bonds because the additional return in stocks isn\u2019t worth the volatility,\u201d stated a source cited by Teresa Rivas of Barron\u2019s<\/em>.<\/p>\n\n\n\n Last week, major U.S. stock indices finished lower, while yields on longer-term U.S. Treasuries moved higher.<\/p>\n\n\n\n