According to Wells Fargo Investment Institute, rising bond yields and a volatile stock market are presenting both challenges and opportunities for investors.
The firm believes that when equity market volatility intensifies, fixed income assets serve as a reliable ballast to support returns, while short-term bonds represent an opportunity to capture higher yields with lower interest rate sensitivity.
Analyst Alex Sagar said in a research note on Wednesday that the institution is also bullish on U.S. large-cap stocks, noting that these companies have strong earnings resilience, solid balance sheets, pricing power, and continued investment in artificial intelligence, which can help them cope with rising financing costs.
He added that commodities can serve as a potential tool to hedge against persistent inflation.