Rising Treasury Yields Are Spooking Investors: Should Buy-and-Hold Investors Care?

When the Federal Reserve raised its benchmark rates 11 consecutive times in 2022 and 2023, many stocks slumped as investors retreated to the higher yields of risk-free CDs and T-bills. As a result, the 10-Year Treasury yield peaked at just over 5% in October 2023.

In 2024 and 2025, the stock market recovered as the Fed cut its benchmark rates six consecutive times. But after dropping to a multi-year low of 3.8% in August 2024, the 10-Year Treasury yield rose again and currently hovers at 4.4%. Those stubbornly high yields suggest that worsening inflation could drive the Fed to raise its rates again.

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So far, the Fed has kept its benchmark rates unchanged this year instead of raising them. However, the military conflicts in the Middle East are driving up energy costs and disrupting supply chains – suggesting more rate hikes are on the horizon. Should long-term, buy-and-hold investors readjust their portfolios to address that shift, or should they tune out the noise?

What do higher Treasury yields actually mean for investors?

Treasury yields are forward-looking, so rising rates suggest investors should brace for messier macro headwinds. If the Fed raises its rates to tame inflation, it’s intentionally throttling economic growth by making it more expensive to take out new loans. It will also strengthen the U.S. dollar and hurt U.S. companies that generate significant overseas revenue.

Those headwinds, along with the higher yields of T-bills, will make U.S. stocks less attractive to investors. That’s why the S&P 500 usually declines or trades sideways as Treasury yields rise.

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Why should most long-term investors relax and do nothing?

If you own a lot of speculative growth stocks trading at sky-high valuations, it’s probably a good time to prune those holdings and pivot toward more conservative investments. But if you’re primarily invested in reliable blue chip stocks or an S&P 500 index fund or an exchange-traded fund (ETF) like the **Vanguard S&P 500 ETF **(VOO 1.50%), it’s smarter to simply do nothing.

If you look back over the past 25 years, the S&P 500 has risen 440% and delivered a total return of 776% when dividends are reinvested. It achieved that growth even through three recessions (2001, 2007-2009, and 2020) and three major rate hike cycles (2004-2006, 2015-2028, and 2022-2023). That’s because the S&P 500 is rebalanced quarterly to only include the 500 most prominent companies in America – and those blue chip juggernauts easily overcame those temporary challenges.

Investors who panicked and sold their stocks during those downturns missed out on massive gains. Therefore, true long-term investors who are confident in their investments should simply ignore the rising Treasury yields and stay focused on their long-term goals.