Yield levels becoming increasingly difficult for long-term investors to ignore

Andrew Prosser, head of investments at InvestEngine, said: “Warnings that rising US borrowing costs could tip the UK into recession underline how quickly stresses in the world’s largest bond market can spread to other economies.

“Higher Treasury yields can feed through into UK gilt yields, mortgage rates and companies’ financing costs, so this is not solely an American concern.

“But UK borrowing costs will also be shaped by domestic inflation and growth, expectations for Bank of England policy, and confidence in the public finances.

“While a sustained rise in US yields would be an important headwind for the UK economy, it should not in itself be treated as a certain signal that recession is around the corner.

“History shows that reacting to every twist and turn in markets is rarely a successful strategy. For long-term investors, periods like this are a reminder of the value of diversification rather than trying to predict the next move in bond or equity markets.

“Spreading investments across regions and asset classes, keeping costs low and maintaining a portfolio aligned with your time horizon and appetite for risk can help investors navigate periods of heightened uncertainty without being driven by individual market headlines.

“No portfolio is immune to market falls and past recoveries do not guarantee future results. That said, investors who work to consistently build a diversified portfolio are typically often the best placed to navigate these changing conditions.”