Though historically low interest rates have been at the core of much of the rally across asset classes in 2010, that doesn't mean anticipated higher rates in 2011 will stop investors from making money.
Strategists remain bullish on the stock market , with forecasts of 10 to 20 percent gains abounding. But market pros remain mostly sanguine about bonds as well, even though rising rates and accompanying inflation usually eat away at the value of fixed-income instruments.
The trick, they say, will be to be more selective.
"I would certain want to underweight Treasurys," Kevin Giddis, president of Morgan Keegan's fixed income capital markets division, said in a CNBC interview. "You've got to be cautious from totally getting out of bonds. Stay with the shorter duration, stay with the wide-spread securities and you'll be fine."
That opinion meshes with a general feeling that bonds won't be quite the easy play they were in 2010, as an awful fourth-quarter performance began to indicate. Strategists believe shorter-term instruments will work better as rates rise and inflation becomes more of an issue.
Interest rates are likely to rise as pressure builds from a recuperating economy and the continued influx of government debt into the marketplace.Page 1 of 4 | Next Page