Rising Rates - Welcome or Dread?

Interest rates have steadily drifted upward thus far in 2026, with longer-term rates near 20-year highs. The 10-Year U.S. Treasury note hit 4.6% in August, up from 3.6% last summer, and rates all along the yield curve have moved in the same direction - up. The reasons include persistent inflation, continued economic growth, AI fueled borrowing, and concerns over U.S. Treasury debt which breached $40 trillion on August 18. Interest payments alone on that debt amount to over $1 trillion annually. Attitudes about higher rates are a matter of position - borrower or lender.  

For borrowers, higher rates are most unwelcome and discourage major purchases. 30-year mortgage rates are approaching 7%, well above record lows seen in 2020. Consumer and home equity loan rates hover around 8% and credit card rates are in the stratosphere, averaging 22%. For those contemplating a home purchase, it can be an agonizing decision, buy now or delay and risk even higher rates later. Cash-strapped credit card holders, paying interest alone will do little to reduce their pain, and paying only the minimum will rapidly increase outstanding debt balances. 

For fixed-income investors, higher rates offer opportunities unseen in quite a while. During most of the period from 2008 through 2022 investors suffered through near zero returns from their “safe” money. One of their biggest decisions now relates to maturity selection. History has shown that extending duration beyond short to intermediate maturities can result in significant buyer regret should rates rise above the yields investors locked in at purchase.  

Equity investors are also keeping an eye on rising rates. Higher rates from debt securities increases competition for stocks, especially given current high valuations. And everyone is watching the economy because higher borrowing costs typically slows demand resulting in reduced overall economic activity. Since no one knows for certain where interest rates are headed from here, it is important that investors possess an intelligent investment strategy that balances their need for income, growth, liquidity, risk mitigation, tax-efficiency, etc.  

Plan, execute, monitor, and adjust.