“Stocks have performed surprisingly well during periods of rising interest rates over the past 25 years,” said FTSE Russell Managing Director Alec Young. “The reason for this is that rates often rise in reaction to accelerating economic growth, which is ultimately good for corporate profits and hence, stock prices. Not surprisingly, economically sensitive equity asset classes like small caps have fared best, with the Russell 2000 Index generating a healthy 22.2% annualized return while the Russell 1000 Growth Index has also chalked up an impressive 20.1% annualized return.”
The $44.53 billion IWF holds 543 stocks and allocates almost 60% of its combined weight to technology and consumer discretionary stocks, sectors that often perform well in rising rates environments.
For more trends in fixed income, visit the Rising Rates Channel.
Tom Lydon’s clients own shares of IWM.