Higher Yields May Be More Structural Than Cyclical

Playbook: Position Portfolios for a Structural Shift

Investors may want to view today’s higher yields as a durable market feature rather than a temporary dislocation. Focus on the income available today and consider extending duration thoughtfully, given that higher yields improve long-term return potential.

• Don't assume yields will quickly revert to prior norms. Structural forces could keep long-term rates above the unusually low levels that characterized much of the previous decade
• Put today’s income to work. Higher starting yields have materially improved potential returns available across fixed income. Rather than waiting for the perfect entry point, investors can capture attractive yields today and benefit from the greater income cushion they provide against future rate volatility.
• Extend duration selectively. A higher-for-longer rate environment does not necessarily argue against longer-maturity bonds. Investors can gradually extend duration to lock in attractive yields for longer, reducing the risk of having to reinvest at lower rates should they decline.

IMPORTANT INFORMATION

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