Investing Insights
Higher Bond Yields and Interest Rates Are Here to Stay
Nov 10, 2023
Sarah Hansen, Morningstar Inc markets reporter, explains the new normal of bond yields and interest rates. Adam Fleck, director of research for ratings and ESG for Morningstar Research Services, discusses how companies with union workers can compete against non-union firms. Topics also include Apple's solid fiscal fourth quarter, McDonald's resilience under inflation pressure, and fixed-income market opportunities for investors.
16:08
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Quick takeaways
- Higher bond yields are tightening financial conditions, impacting borrowing costs and stock market outlook.
- The current higher bond yields and interest rates are a return to normalcy, challenging the expectation of returning to pre-pandemic rates and suggesting rates could stay higher for an extended period.
Deep dives
Financial conditions and their impact on the economy
Financial conditions refer to various factors, including interest rates, bond yields, equity valuations, the strength of the dollar, and credit spreads, that affect the economy, businesses, and consumers. Tighter financial conditions indicate limited credit access and higher borrowing costs, potentially leading to an economic contraction. Conversely, looser financial conditions signify an expanding economy with easier borrowing. Higher bond yields resulting from the Fed's fight against inflation are tightening financial conditions, impacting borrowing costs and stock market outlook.
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