Will Rising Rates Divert Investor Capital from Stocks?

“I don’t think investors need to worry about interest rates impacting share buybacks,” said Kevin Kelly, CEO of Benchmark Investments. “Interest rates are still historically low.”

Quelling these concerns is the perfunctory investor movement to bonds—the default safe haven when the stock market goes awry. Rising yields during the October sell-offs were partly to blame for the fall in equities, but as stock prices continue to experience deeper declines, a movement back to bonds has been the result.

The cheaper U.S. government debt has certainly attracted foreign investors, particularly from Japan.

“As the Fed is pretty bullish on interest rate hikes to neutral levels, this is supporting the dollar against the yen. So some investors seem to be buying U.S. bonds without currency hedging,” said Naoya Oshikubo, senior manager at Sumitomo Mitsui Trust Asset Management.

Related: The Basics of Bonds – MoneyWeek Investment Tutorials

For more trends in fixed income, visit the Rising Rates Channel.