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Why Volatility May Be a Bigger Threat Than Rates
By Advisor Perspectives
Russ discusses why investors should worry less about higher interest rates and more about the volatility resulting from tighter financial conditions.
Investors are growing anxious. Most of the angst is focused on interest rates and the Federal Reserve (Fed). However, although that fear is not irrational, it may be exaggerated, as I discussed a few weeks back. All else equal, stocks can withstand modestly higher rates. The obvious rejoinder is that all else is never equal.
Rather than a marginally more aggressive Fed, the bigger threat may be the side effect of tighter financial conditions leading to more volatility. In other words, stocks can probably withstand yields of 3% on the 10-year Treasury, but a VIX stuck in the 20s may create a real headwind for equities.
Read more at Advisor Perspectives.
Photo: Andy Maguire