The prospect for an earlier-than-expected Fed hike pushed interest rates higher last Friday. The two-year Treasury yield broke above 0.70% while the 10-year yield climbed above 2.25% for the first time since late December. Other rate-sensitive assets (e.g. utilities, gold) sold off as well, and the rotation out of defensive names into more cyclical companies is evident in recent fund flows. We expect this rotation to persist and continue to advocate that investors underweight bond market proxies, like utilities, instead favoring cyclical growth companies, which should benefit from a stronger economy.
Source: Bloomberg
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog and you can find more of his posts here.