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Market Update

Is Lower for Longer Over?

With bond yields rising, some wonder if the era of ultralow rates is coming to an end--and what that means for stocks.

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With the stock market continuing to gyrate wildly, it's easy to forget that, until now, equities had generally moved in a straight line higher. Since the market hit its trough, the S&P 500 has climbed more than 280% as of this writing. In January alone, it was up more than 5%. One big reason why stocks have done so well up until this point is that bond rates have been at historically low levels. The 10-year U.S.Treasury yield hit its lowest point ever, 1.36%, not even two years ago. It's hard for investors to make any money at those interest-rate levels, so, naturally, they turned to stocks.

Now, though, the idea that we're still in a "lower for longer" rate environment is being questioned by many financial professionals. With the 10-year Treasury yield rising by about 18.75% year-to-date--it was at 2.85% at the time of writing--ultralow rates are now a thing of the past. But where do rates go from here? Do they get to levels where investors move money from stocks to bonds?

Bryan Borzykowski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.