gcgang
Thinks s/he gets paid by the post
- Joined
- Sep 16, 2012
- Messages
- 1,571
Can someone explain to me like I'm 10 what this means for an early retirement portfolio? I'm just looking for an explanation of what a higher 10 year treasury does to the economy and portfolios.
It would do very bad things to a portfolio.
When interest rates go up, the value of bonds decline.
Also, when rates are high, PEs on stocks, meaning value of stocks, are usually lower, like 40+ years ago when yields were the 16% he mentioned and PEs were about 7.
The effect on the economy of higher rates is to slow it down.
But if you are really EARLY in building your portfolio, where the portfolio isn’t worth a lot but it will be added to regularly over many years (like most of us current retirees were 40 years ago) it would present a great buying opportunity.