With yields rising, investors may be wondering if volatility in the stock market is on the horizon. Last week, however, several different sectors saw increased investor interest in the face of a reversal in bond yields. In particular, companies that focus on technology, real estate, and mortgage loans experienced some of the biggest gains on the stock market due to the potential for higher interest rates.
Tech companies are often seen as the most likely to benefit from a rising interest rate environment. As businesses across the world increasingly need to capitalize on the benefits of digital transformation, these companies tend to see their stock prices increase with the high demand for their products and services. This was exemplified last week when the Nasdaq Composite rose by 1.7% as a result of increased investor confidence in tech stocks.
Real Estate Stocks
Real estate stocks may also be better positioned for an environment of higher yields. Property prices are typically impacted when mortgage rates move higher, as this decreases the amount of indebtedness that potential buyers have to negotiate with lenders. Higher property prices also mean increased value for real estate investors and, as a consequence, higher returns for shareholders. Last week saw the real estate sector rise by 1.2%, with a number of companies gaining ground on good news from the housing market.
Mortgage Loan Stocks
Mortgage loans have also been closely watched in recent days. With yields rising, mortgage companies may stand to benefit significantly. This is because, when rates move higher, borrowers become more willing to take out loans in order to capitalize on the lower costs of borrowing. Mortgage companies can then increase their loan origination and servicing volumes. Last week, the S&P/LSTA Mortgage Loan Index rose by over 1%, signaling increased investor interest.
Overall, last week’s reversal in bond yields resulted in increased investor appetite for companies in the technology, real estate, and mortgages sectors. With the potential for further volatility in yields, investors may be looking to these sectors in search of safe investments. As a result, several companies saw significant gains on the stock market, reaffirming the potential of these sectors amid higher yields.