June 2026 Newsletter:

Interest rates have been anything but stable lately. With Kevin Warsh stepping in for Jerome Powell as Federal Reserve Chair late last week, alongside inflation uncertainty and stronger-than-expected earnings growth, markets have been recalibrating expectations.

To put these movements in context, the 10-year Treasury yield currently sits at 4.56%, while the 2-year yield is at 4.12%. Looking at the past couple of years in isolation, it appears yields have remained stubborn, hovering around the highs of late-2024.

Yet, if we zoom out, current yields are hardly out of the ordinary. The 10-year treasury yield has averaged roughly 4.5% since 1988, putting today's rate right at the historical norm.

This perspective helps explain why the sense that rates are "high" says more about the unusually low-rate era we lived through in the 2010s and early 2020s than it does about where rates stand today.

Meanwhile, while volatility in rates has been a headwind for bonds in recent weeks, the bond market itself has held up reasonably well year-to-date. Aggregate US bonds are essentially flat for the year, while other categories like high-yield, international, and shorter-duration bonds are modestly positive.

Looking forward, there's also a silver lining for long-term investors. The starting yield on a bond tends to be a strong predictor of forward returns. With the 10-year anchored at around 4.5%, history suggests today's yields offer a reasonable foundation for future fixed-income performance.

Higher rates can sting in the short run, but for patient investors, the current environment offers a solid long-term opportunity, as today's yields provide a historically reasonable foundation for future fixed-income returns.

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The information presented is not investment advice - it is for educational purposes only and is not an offer or solicitation for the sale or purchase of any securities or investment advisory services. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser when making investment decisions.