Last week’s retail sales numbers provided more evidence that the U.S. economy should grow faster in the second half of the year. Outside of household spending, most economic measures – notably manufacturing and housing-related numbers – have been substantially stronger than expected.
The consistently strong data has pushed 10-year yields up to 2.6%, the highest level since early July. The move on the short-end of the curve has also been significant. Following the release of a San Francisco Fed note suggesting that investors may be underpricing the potential for an early hike, the yield on the 2-year note approached 0.6%, the highest level since spring 2011. And the rate rises are likely to continue if the Fed statement provides any signs of an early rate hike.
As such, investors may want to familiarize themselves with these ideas for positioning portfolios as rates start to rise.
Sources: BlackRock, Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.