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Rates Up - Time to Reevaluate

February 2, 2017
Andrew Pace

As most investors are aware, we had an aggressive rate rise in U.S. Treasury rates over the last few months, specifically on the 10-year Treasury during Q4 2016. Given this unexpected, aggressive rate rise and the uncertainty of where rates will go in 2017, many portfolio managers may be tempted to try and predict where interest rates will go and base their investment decisions on that prediction. Shape Managers, though, know that they must continue to stay disciplined. They understand that, after such an aggressive rate change, it is important to reevaluate the current market by running total return scenario analysis to assess which sectors are best to add in (or subtract from) the portfolio based on their forward-looking total returns. But first, it is important to examine just how large of a rate rise we experienced the past few months to then determine what strategies to consider going forward.

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