What Outperforms When Rates Rise?
Real assets, such as commodities, tend to perform better than other asset classes during periods of restrictive monetary policy.
Tim Strauts: Today, we're going to examine how different asset classes perform in different interest-rate environments. The chart looks at the time period from February 1972 to April 2015 and divides each month into one of three different periods.
In an expansive period, the Federal Reserve has followed an easy-money policy that is defined by a decreasing discount rate and a decreasing Federal funds rate. In a restrictive period, the Fed has followed a tight money policy that is defined by an increasing discount rate and an increasing Federal funds rate. Finally, in an indeterminate period, the Federal Reserve's intentions are uncertain because one measure is rising and the other measure is falling.