Income investing strategy for rising interest rates: Bank of America - Business Insider

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Bank of America says investors might start selling stocks and buying bonds sooner than expected. Here's when it could happen, and what to own for maximum income if yields keep rising.

Savita Subramanian of Bank of America says a big shift from stocks to bonds might be close at hand. She explains the sectors and types of stocks that will be most appealing in that environment.After more than a decade of ultra-low bond yields and ultra-low interest rates — the lowest in centuries or longer, according to some analyses — more investors have turned to stocks for the stability and income they once expected from bonds. And they're still relying on stocks for growth.

"Following the GFC, the average recommended stock allocation was ~50%, well below the current recommended allocation of 58.4%," she wrote in a note to clients. But whenever it happens, it's going to remake some patterns in the market that have persisted for more than a decade, and an investor looking for income might want to prepare for that now.Subramanian said the higher-rate environment would be difficult for low-volatility stocks and for stable dividend payers.

 

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