# How Will Interest Rate Changes Affect My Portfolio?

> The two ways interest rates reach a portfolio, how to measure each holding’s rate sensitivity, what 2022 revealed, and a worked example of a rate-sensitive portfolio and a less sensitive one.

Source: https://www.exent.ai/resources/portfolio-rate-sensitivity · Reviewed by David, Senior Analyst, Exent · Published Nov 12, 2026 · Updated Nov 12, 2026

## Key takeaways

- Rates reach a portfolio in two ways: bond prices fall when yields rise (about 10% for a 10-year duration and a 1-point rise, per FINRA), and stocks valued on distant profits or cheap borrowing get repriced.
- 2022 was the live test: as the Fed raised its target range from near zero to 4.25–4.50%, TLT returned −31.2%, QQQ −32.6% and SPY −18.2%, while energy (XLE) returned +64.3% (Exent’s data).
- A practical gauge is each holding’s correlation with long Treasuries (TLT) plus its 2022 result. REITs and utilities scored high on the first; growth stocks on the second.
- Rate sensitivity cuts both ways: the same long bonds that fell in 2022 rose 13.4% in the COVID crash.

## How will interest rate changes affect my portfolio?

Through two channels, and most portfolios are exposed to both.

- **Bonds, directly.** When market yields rise, existing bonds with lower coupons fall in price. FINRA’s rule of thumb: for each 1‑point change in rates, a bond’s price moves the opposite way by about its duration. A [duration of 10 means roughly a 10% fall](https://www.finra.org/investors/insights/bonds-interest-rate-changes-duration) for a 1‑point rise. Short bonds barely move; long bonds move a lot. See bond duration.
- **Stocks, indirectly.** Higher rates raise the discount rate on future profits, which hits companies whose value sits far in the future, such as fast‑growing tech. They also raise borrowing costs for indebted businesses like REITs and utilities, and make dividend yields less attractive next to safe bond yields.

Falling rates work in reverse, though not always symmetrically: rates often fall because the economy is weakening, which hurts stocks for a different reason.

## How do I measure my portfolio’s rate sensitivity?

Use two measures together. The first is correlation with a long Treasury fund (TLT), a proxy for how much a holding moved with long‑term interest rates: the higher it is, the more the holding tended to fall when long bond prices fell, which is when yields rose. The second is what the holding did in 2022, a year dominated by fast rate rises. Exent’s data, as of Sep 30, 2026:

| Holding | Correlation with TLT (5 yrs, monthly) | 2022 return | Drop in 2022 bear market |
| --- | --- | --- | --- |
| TLT (20+ year Treasuries) | 1.00 | −31.2% | −31.1% |
| AGG (core US bonds) | 0.94 | −13.0% | −15.9% |
| TIP (inflation-protected bonds) | 0.77 | −12.3% | −18.8% |
| VNQ (REITs) | 0.69 | −26.3% | −33.4% |
| SHY (1–3 year Treasuries) | 0.69 | −3.9% | −5.3% |
| Realty Income (O) | 0.62 | −7.4% | −23.5% |
| SPY (S&P 500) | 0.56 | −18.2% | −25.4% |
| QQQ (Nasdaq‑100) | 0.54 | −32.6% | −34.6% |
| XLU (utilities) | 0.49 | +1.4% | −21.3% |
| SCHD (dividend stocks) | 0.48 | −3.2% | −18.9% |
| XLF (financials) | 0.42 | −10.6% | −26.9% |
| BIL (1–3 month T-bills) | 0.16 | +1.4% | −0.2% |
| XLE (energy) | 0.03 | +64.3% | −26.9% |

Read the two columns together. SHY is highly correlated with TLT but has little duration, so it barely fell. QQQ’s correlation is moderate, yet it lost more than TLT in 2022: growth stocks carry their own kind of rate risk through valuations. Energy had almost no link to Treasuries. Correlation changes over time, so treat any one window as a description of the recent past. See [correlation](https://www.exent.ai/learn/correlation-coefficient) and the data pages for [TLT](https://www.exent.ai/etfs/tlt) and [AGG](https://www.exent.ai/etfs/agg).

## What did 2022 show about rate risk?

That stocks and bonds can fall together when rates are the cause. The Federal Reserve raised its target range from 0–0.25% in early 2022 ([first hike, March 2022](https://federalreserve.gov/newsevents/pressreleases/monetary20220316a.htm)) to 4.25–4.50% by December ([FOMC statement, Dec 14, 2022](https://federalreserve.gov/newsevents/pressreleases/monetary20221214a.htm)). In Exent’s data, a 60% SPY / 40% AGG portfolio returned −15.8% that year, close to SPY’s −18.2%: the bond half did not cushion the stock half. Full story in the 2022 inflation bear market and is 60/40 dead?

## A worked example: two portfolios, one rate shock

Two illustrative portfolios, replayed with the same data:

- **A, rate‑sensitive:** 30% QQQ, 20% SPY, 15% VNQ, 10% Realty Income, 25% TLT.
- **B, less sensitive:** 50% SPY, 10% VYM, 5% XLE, 20% SHY, 15% BIL.

| Measure | Portfolio A | Portfolio B | SPY |
| --- | --- | --- | --- |
| Weighted correlation with TLT | 0.69 | 0.49 | 0.56 |
| 2022 calendar return | −25.9% | −6.5% | −18.2% |
| 2022 bear market replay (peak to trough) | −30.6% | −16.9% | −25.4% |
| COVID crash replay, 2020 | −30.6% | −23.6% | −34.1% |

Portfolio A held long bonds as a “safe” 25%, but in 2022 that slice added 7.8 points of loss in the replay. Portfolio B’s short Treasuries and T‑bills barely moved, and its small energy slice rose. B also has less growth potential in a falling‑rate boom, which is the trade‑off. Replays add each holding’s own peak‑to‑trough drop, a slightly conservative estimate. Illustrative portfolios, past data, not a forecast or a recommendation.

## How do I check if my portfolio is ready for higher interest rates?

Run through these questions with your current holdings:

- How much of the portfolio is in long-duration bonds or bond funds, and what is each fund’s stated duration?
- How much is in REITs, utilities and other borrowing-heavy, bond-like stocks?
- How much is in unprofitable or high-valuation growth stocks, which fell hardest in 2022?
- What did the whole portfolio do in a 2022 replay, and which holdings drove the loss?
- Is the “safe” part of the portfolio short-term (T-bills, short Treasuries) or long-term? Short-term holdings fell far less in 2022.
- Is anything in the portfolio likely to benefit from the scenario, the way energy did in 2022?

 How per‑holding sensitivity to rates and other macro factors can be measured is explained in  [how macro sensitivity is measured](https://www.exent.ai/how-it-works/macro-impact). 

## What happens to my portfolio if rates fall?

The same exposures tend to reverse, which is why long bonds are held at all. In the COVID crash, TLT rose 13.4% while SPY fell 34.1%. Across the 16 months since mid‑2016 when SPY fell more than 4%, TLT averaged −1.9% against SPY’s −6.7% (same data). It cushioned many stock selloffs, but not the rate‑driven one. Which sectors have done well as rates fell is covered in [sectors when rates fall](https://www.exent.ai/resources/sectors-when-rates-fall) and [Fed rate cuts and stocks](https://www.exent.ai/resources/fed-rate-cuts-and-stocks).

## How to check rate sensitivity with Exent

1. Upload a screenshot of your holdings (or a CSV, Excel, PDF or Google Sheet); no brokerage login.
2. Portfolio Analysis replays the portfolio through the 2022 rate-hike bear market and four other crises, and groups holdings that move together into correlation clusters.
3. Macro Impact, now rolling out, estimates each holding’s sensitivity to rates, oil, the dollar and the economy. These are measured sensitivities, not forecasts.

Exent is our product: [Exent portfolio check](https://www.exent.ai/portfolio)

## Frequently asked questions

### Which investments are most sensitive to interest rates?

Long-term bonds first: a bond fund with a 10-year duration falls about 10% if rates rise 1 point. Among stocks, REITs, utilities and high-valuation growth stocks were the most affected in 2022.

### Do higher interest rates hurt stocks?

Often, especially when they rise fast. In 2022 SPY returned −18.2% and QQQ −32.6% in Exent’s data as the Fed raised rates from near zero to 4.25–4.50%. Energy stocks, by contrast, rose sharply that year.

### Are bond funds safe when rates rise?

Short-term ones held up: in 2022 a 1–3 month T-bill ETF returned +1.4% and a 1–3 year Treasury ETF −3.9%. Long-term funds fell much more, with TLT returning −31.2%.

### How can I measure interest rate risk in my portfolio?

Check each bond fund’s duration, then each stock or fund’s correlation with a long Treasury fund and its 2022 result. Weight them by position size to see where the rate risk sits.

### Should I sell bonds before rates rise?

Nobody knows reliably when rates will rise. Many investors instead choose bond duration to match when they need the money, so price swings matter less.

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Educational content, not investment advice. Past performance does not guarantee future results.