Interest rates are finally going up.

And the bond markets are recoiling in terror. After Donald Trump’s election as president we have seen interest rates rising implacably. In the long run this is probably healthy, since fully-functioning capital markets optimize when interest rates are set by supply and demand, not Federal Reserve diktat. If interest rates continue to rise, the bond markets will register solid losses in the coming year, especially in the long end of the curve. Read about the carnage here.

However, should a stock market decline emerge, then there’s likely to be a snap back in bond prices due to a flight to safety. Totally cashing out of bonds is probably not necessary at this point.

Our current plan is to wait and watch, and seek opportunities in both the bond and stock markets. I’m also preparing a “hail Mary” plan for a sudden interest rate shock. That’s certainly not necessary now.