‘Bonds are riskier than stocks,’ investor says. Where she’s putting money to work as rates rise – CNBC




As interest rates rise, investors may find themselves reconsidering their stock-to-bond allocations.

The U.S. 10-year Treasury yield hit its highest level since March 20 on Thursday after moving above 1% for the first time since the Covid-19 pandemic began to wreak havoc on markets. Stronger-than-expected jobless claims data and Congress confirming Joe Biden’s election as president supported the move.

However, the road to higher rates will likely be difficult, Nancy Tengler, chief investment officer at Laffer Tengler Investments, told CNBC’s “Trading Nation” on Thursday.

“What investors are starting to see is that we may get a robust reopening with the vaccine, and so, there’s pressure on the long end for rates to rise,” Tengler said.

But the combination of a weakening U.S. dollar and a reopening-fueled “burst of demand” could bring cyclical inflation this year, “which will continue to keep pressure on the long end,” she said.

“And the Fed will keep the short rates low until they hit their inflation target or change their mind. So, we believe from here, bonds are riskier than stocks,” she said.

Tengler said her firm was putting money to work in traditional bank stocks, having warmed up to the group “a few months ago,” highlighting JPMorgan and PNC Financial as her top picks.

She also recommended considering convertible securities, preferred stocks and risk-on equities.

“You’ll hear many people say that higher interest rates are bad for higher-multiple stocks, which is generally true, but during the five
Source…

Related Post