Fixed-income investors tend to focus on interest rates and worry that when interest rates rise the value of bonds goes down. But interest rates are just one aspect of the market, and the concern that they are rising shouldn’t keep you out of the market completely.
Looking at what happened to investors from 2008 to 2016 reinforces that lesson. When rates went very low in 2008, investors worried that they had nowhere to go but up, so they scaled back allocation in the fixed-income market. In 2013 the Fed started to scale back its quantitative easing programs, which prompted a further retreat. Investors then allocated with vigor in 2016 — to the tune of $114 billion in net flows.1 Then, in December 2016, the Fed inched rates upward.
