Low yields and interest rates support equities in several ways, such as reducing debt and borrowing costs, making stocks look relatively attractive to bonds and helping increase the value of companies’ future cash flows. ― Reuters picNEW YORK, Feb 20 — The US stock market has so far digested a surge in Treasury yields, but some investors are worried that a continued ascent could prove more problematic.
“When ... government bond yields rise, all asset prices should reprice lower — that’s the theory,” said Eric Freedman, chief investment officer at US Bank Wealth Management, adding that he does not believe yields have yet risen far enough to provide an competitive alternative to stocks. The latest fund manager survey by BofA Global Research showed a record in the net percentage of investors taking higher-than-normal risk, cash allocations at their lowest level since March 2013 and allocations to stocks and commodities at their highest point in around a decade.
Low yields and interest rates support equities in several ways, such as reducing debt and borrowing costs, making stocks look relatively attractive to bonds and helping increase the value of companies’ future cash flows. J. Bryant Evans, a portfolio manager at Cozad Asset Management, recently added bank and mortgage company stocks to a high dividend portfolio this week to take advantage of the improving economic outlook and rising rate environment.