What the Market Is Telling Us About the Impact of a Potential Fed Rate Hike
The market isn't as panicked as many investors have been.
In the weeks leading up to the Fed’s meeting today, the bond market has increasingly priced in the expectation that the Fed would raise short-term interest rates. Still, slowing growth in China and troubling signs leave a bit of room for the possibility that the Fed might reconsider its plans.
Over the past few months, we’ve taken a look at the potential impact of a Fed rate hike on bond funds by examining rising-rate periods of the past and more recently at evaluating how some of our Morningstar Medalists fared during rising-rate periods. The past can only tell us so much, of course, given that no two interest-rate cycles are identical. Indeed, the global economic and political landscape has changed tremendously even since the Fed’s last rate hike cycle in 2005-06.