“Momentum, small cap, and value factors all have tended to outperform the market when interest rates are rising, but value has posted the smallest median return since 1962. It appears that rising interest rates tend to coincide with stronger economic conditions and corporate pricing power which benefits companies that are leveraged to earnings growth and less reliant on dividends to generate their return streams,” said PowerShares.
DWAS also allocates a combined 44.4% of its weight to consumer discretionary, technology and industrial names, three of the better-performing sectors when rates rise.
DWAS Rises With 10-Year Yields
Chart Courtesy: PowerShares