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Monday, March 8, 2021

History says rising rates are bullish for stocks

The recent bout of volatility in the bond market has investors concerned about what a sustained rally in interest rates could mean for stocks.

Rising interest rates mean rising borrowing costs, which doesn’t sound great for stocks. Also, higher yields arguably make bonds more attractive as an investment, which doesn’t sound great for stocks either. And so it’s not too surprising to see stocks trade lower (^GSPC) in the past month as yields (^TNX) have surged.

However, financial markets are a bit more complicated than that. And