Interest rates don’t just affect your mortgage or credit cards—they play a major role in your long-term investment performance. As rates rise, the ripple effect can impact stocks, bonds, real estate, and even your retirement income plan. At MB Wealth Advisors, we help clients understand these shifts and adjust their strategies to stay on track for long-term goals, no matter the market cycle.
Why Do Interest Rates Go Up?
The Federal Reserve typically raises rates to slow inflation and cool down an overheating economy. When borrowing becomes more expensive, consumer spending tends to slow, and businesses may scale back investments. These moves are intended to stabilize prices and maintain economic balance—but they also shift how different investments perform.
Impact on Bonds and Fixed Income
One of the most direct effects of rising interest rates is on bonds. As new bonds offer higher yields, the value of older bonds with lower rates drops. This is called interest rate risk, and it’s something we actively manage for clients—especially those in or near retirement.
- Shorter-duration bonds tend to hold up better during rising rate environments
- Bond ladders can help create income while minimizing reinvestment risk
- Municipal bonds may offer tax-advantaged yields for high-income investors
Learn more about how we manage bond and mutual fund strategies to adapt to interest rate changes.
What Happens to Stocks?
Rising rates can create headwinds for certain stock sectors. Growth stocks, especially in tech, tend to be hit harder because their future earnings are discounted more steeply. On the other hand, sectors like financials or energy may perform better.
We help clients diversify across asset classes and sectors to reduce exposure to interest-sensitive investments. Tactical rebalancing and active management can help mitigate downside while taking advantage of opportunities in undervalued areas.
Real Estate and Rising Rates
As mortgage rates increase, demand for housing often slows. This can cool real estate investment returns, especially in the short term. However, rising rents and low housing supply in markets like North Carolina can still support long-term real estate value. We evaluate real estate exposure as part of your broader allocation and adjust based on your timeline and risk tolerance.
Cash and CDs Are Back
The good news? Rising rates bring better yields on savings accounts, money market funds, and CDs. For conservative investors, this creates more options for generating low-risk income. We help retirees and pre-retirees create income ladders using a mix of short-term instruments tailored to their needs.
Adjusting Retirement Planning in a Rising Rate Environment
If you’re nearing retirement, rising rates may impact:
- Withdrawal strategies – Your bond income may improve, but market volatility could still impact timing
- Annuity planning – Higher rates may offer better payout options from insurance carriers
- Inflation protection – Now more than ever, a mix of assets is critical for long-term purchasing power
We customize retirement plans that are flexible enough to withstand rate changes and market cycles.
Don’t Overreact—Plan Proactively
Too often, investors panic when rates rise—moving to cash, pulling out of stocks, or abandoning long-term strategies. But with the right guidance, these periods offer an opportunity to rebalance and refine your portfolio. Staying invested with discipline is often the best path to long-term growth.
Let’s Talk About Your Strategy
At MB Wealth Advisors, we don’t rely on one-size-fits-all advice. We evaluate how interest rates impact your specific goals, risk tolerance, and timeline—and we adjust your plan accordingly.
Call (704) 584-9363 or schedule a personal consultation at mbwealthadvisors.com/contact/#connect.
