Interest rates are on the rise, so should fixed income investors head for the exits? Not so fast. Basic bond math shows that in a rising rate environment, higher income usually offsets any capital losses. In fact, in each period between the Federal Reserve’s three most recent rate hikes, bond returns have been flat or positive. Although rates may continue to increase, it will likely be at a gradual pace, and core bonds should remain a key component of investor portfolios.
Past results are not predictive of results in future periods.