Roberts Nash Advisory Group

March 2021 Asset Allocation - Stocks and Yields: It's Complicated

With the light at the end of the COVID-19 tunnel approaching, it is no surprise that market attention is increasingly turning to what awaits us beyond the health crisis. Factoring in the magnitude of upcoming fiscal spending, the bond market is visibly seeking to test the conviction behind the Federal Reserve's intentions regarding the impending rise in inflation. We do not expect the Central Bank to change its stance in the coming months. As a result, the rise in rates, although it has the potential to continue during the year, should slow down and remain relatively contained.

To what extend is the stock market threatened by this potential increase in long-term interest rates?  To answer this question, we look back at the last 40 years of the "complicated" relationship between stocks and yields.  The conclusions are likely to surprise some investors.

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** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **

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