The Fed’s Rate Plan Won’t Tank Our Portfolio
Last week, I made you do mental gymnastics on the topic of duration risk, also called interest rate risk. Put simply: Duration risk quantifies the degree of “headwind” an asset’s price will face if interest rates rise. In the fixed-income world, putting credit (aka default) risk aside, duration is the sole driver of a bond’s price. But in the equity world, there are many other factors at play. Here, “growth” stocks are mostly considered “long-duration” assets. They are more sensitive to interest rate moves. Specifically, when interest rates are rising, most growth stocks suffer a much stronger headwind against price increases.
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