Bond yields have been all the talk across financial markets in recent weeks, but will they stand in the way of the market rally?
Over recent months, US Treasury yields have been steadily climbing, and after hitting their highest levels in more than a year, markets are starting to become agitated by the move.
Since mid-February, we have seen a marked shift in sentiment towards high-growth stocks. This has been driven by the opportunity cost of what is effectively the risk-free rate of return across the market increasing, and in turn, drawing some investors out of the market.
However, for all the concern around the impact that rising bond yields might have, and what they tell us about future interest rate expectations, we believe the market is getting ahead of itself with its worries.
In fact, for the time being, we still believe this bull market has further potential to play out, with the growing number of stocks on ‘discount’ representing a great opportunity for us to take advantage of the volatility.