2022 was one of the worst years for bond returns. Conservative investors with larger bond allocations in their portfolio would have suffered large paper losses in the face of the fastest interest rate hiking cycle in history. But these losses could mean additional future returns.

Many investors worry that the present market environment of rising interest rates will decrease equity valuations and therefore lead to relatively poor equity market performance over the next year or more. From a theoretical perspective, how do these rate hikes affect the market?

The last time tapering occurred in 2013, markets wobbled for a while, and bonds - the most badly affected of all asset classes - suffered a significant loss over a short period of time. The event was then dubbed the “Taper Tantrum”. With a fresh round of tapering looming on the horizon, how worried should we be of our investments?

Are bonds really safer than stocks? The data suggests otherwise.