Interest rates rose and stocks fell on Thursday, as investors reckoned that they had overshot the Fed’s willingness to cut interest rates.
This isn’t anything to get excited about. After a 65-basis-point slide since last October, inflation-indexed Treasury yields were due for a bounce.
The best way to address the issue in a portfolio context is to own US banks, whose stock prices tend to improve with higher interest rates. US bank stocks rose by about 1.2% on Thursday in response to higher yields. As I wrote on April 22, US bank stocks are reasonably priced at 11x forward earnings.
Read more: Wall Street’s ‘transitory’ tantrum