Making Sense of Today's Markets: Higher Rates, Real Opportunities

Higher rates are creating opportunities. Short-term bonds offer attractive yields, munis are in a compelling place after September's selloff, and venture capital is compelling but concentrated. Quality matters.

Last Edited by: LPL Research

Last Updated: October 08, 2026

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IN THIS ARTICLE

Higher interest rates are reshaping how investors think about their portfolios. Three recent LPL Research pieces, covering the Treasury market, municipal bonds, and venture capital, share a common message. Opportunities exist today, but quality and selectivity matter more than ever.

Bonds Offer More Income Than They Have in Years

Higher rates have pushed the federal government's borrowing costs to roughly $1 trillion this fiscal year, now exceeding spending on defense or Medicaid. That pressure has created volatility in the Treasury market, particularly in longer-term bonds.

But higher rates also mean higher yields for investors. Short- and intermediate-term Treasuries maturing in one to five years now offer attractive yields that can help offset price declines if rates rise further. LPL Research favors these shorter maturities over 20- and 30-year bonds, which face greater uncertainty from inflation, policy shifts, and heavy government debt issuance.

The municipal bond market tells a similar story. September delivered the worst monthly return for munis since 1987, but the selloff stemmed from liquidity pressures and rate volatility rather than deteriorating credit quality, according to PIMCO's David Hammer on this episode of the LPL Market Signals podcast.

High-quality municipal credit fundamentals are in their best shape in over 20 years, with tax collections 40% to 50% above pre-pandemic levels. Today's muni yields are near their highest since 2001, meaning investors can earn tax-free income that would require nearly 8% from a taxable investment to match.

Venture Capital: Record Headlines, Narrow Participation

U.S. venture-backed companies raised more than $400 billion in the first half of 2026, surpassing all of 2025. Yet most of that capital is concentrated in artificial intelligence. AI firms captured roughly 86% of venture dollars invested, despite accounting for less than half of total deal activity.

This concentration creates real risks. If AI growth disappoints, private market valuations, which have rebounded above 2021 highs, could come under pressure. Companies are also staying private longer, so investors should expect extended holding periods and limited options to sell.

LPL Research views venture capital as a satellite allocation within a broader portfolio. Position sizing should reflect its unique risks, including long lockups and the possibility of permanent capital loss.

What This Means for You

Headlines have been busy for bond markets lately, but higher yields offer attractive income opportunities with short- to intermediate-term securities offering the most attractive risk-return tradeoff. Within the venture capital space of private markets, approach allocations in diversified portfolios with measured position sizes and remain aware of potential risks.

 

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HIGHER RATES, REAL OPPORTUNITIES FAQs

Are higher interest rates good or bad for bond investors?

Higher rates push bond prices down in the short term, but they also mean new bonds pay more income. Over time, that higher income can offset the price decline. Investors who reinvest as bonds mature can benefit if yields stay elevated. Bond ladders, which spread maturities over time, let investors capture income while managing rate risk.

No. The selloff reflected a liquidity vacuum and rate volatility, not credit deterioration. Municipal issuers have strong fundamentals, with tax collections well above pre-pandemic levels. High-quality munis now offer some of the most attractive tax-adjusted yields in decades, and the intermediate part of the curve, roughly 10 to 15 years, looks especially compelling.

Venture capital can offer strong long-term returns, but it carries significant risks including heavy concentration in AI, elevated valuations, and limited liquidity. Most investors should treat it as a small satellite position within a diversified portfolio and spread commitments across multiple years rather than investing all at once.

Disclosures

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. ​

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. ​

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. ​

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. ​

All investing involves risk, including possible loss of principal. ​

US Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. ​

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio. ​

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company’s profitability. Earnings per share is generally considered to be the single most important variable in determining a share’s price. It is also a major component used to calculate the price-to-earnings valuation ratio. ​

Precious metal investing involves greater fluctuation and potential for losses.

The fast price swings in commodities will result in significant volatility in an investor’s holdings. Commodities include increased risks, such as political, economic, and currency instability, and may not be suitable for all investors.​

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Indexes are unmanaged and cannot be invested in directly.

The MSCI US Broad Market Index captures broad U.S. equity coverage. The index includes 3,204 constituents across large, mid, small and micro capitalizations, about 99% of the U.S. equity universe. Indexes are unmanaged and cannot be invested in directly.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Private credit carries certain risks — illiquidity, opacity, borrower concentration, and bespoke structures — that distinguish it from corporate bonds and bank loans and complicate its evaluation and oversight.

All index data from FactSet or Bloomberg.

This research material has been prepared by LPL Financial LLC.

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