The following response was provided by Carol Crowley, Edward Jones Financial Advisor
If you follow the financial news even casually, you may know that bond yields have been rising since the year began. What does this mean to you, as an individual investor?
It might be positive news – the 10-year Treasury yield is usually a good indicator of investors’ confidence about the economic outlook.
However, sharp jumps in these yields certainly can cause sudden pullbacks in stock prices, as has occurred recently. But such drops often prove to be short-lived, with stocks eventually rallying.
Keep in mind, though, that bond yields and interest rates are closely related, so if interest rates also go up, the value of your existing bonds could drop. On the other hand, rising interest rates can help and hurt stock prices, depending on the type of industries involved.
Overall, you’re better off not making drastic changes to your portfolio in anticipation of interest rate movements. Instead, stick with a personalized, long-term investment strategy based on your individual goals, risk tolerance and time horizon.
Ultimately, your moves – not external forces – drive investment success.