Impact of rising interest rates on equity markets Conclusions While rising interest rates typically are perceived as a negative for stock performance, outcomes are difficult to predict with precision, as historical patterns are not definitive and each cycle is different. Investors should expect results to depend on economic and market factors specific to each cycle. The environment for this next cycle suggests that real returns in the short term could be positive. Investor strategy should consider the following factors: WW The impact of higher rates often begins before the first tightening occurs, as performance and flows so far this year have already shown. WW Economic growth and a return to normalized conditions, rather than rising inflation, are triggering the upcoming tightening cycle. This suggests a slow and steady pace of rate hikes, which would be supportive of stocks, rather than more aggressive action that is typical when the Fed is seeking to combat sharply rising inflation.

Against this backdrop, equity performance is less likely to be rate-driven and more likely to reflect market valuations, earnings growth, and the rate of productivity increases. WW Even with this supportive cycle, greater uncertainty at the inflection point and the historical drag of higher rates on performance suggest investors should lower their return expectations and remain diversified. As rates normalize and distortions are unwound, high-dividend stocks, REITs and the Utilities sector will likely suffer. Technology and Health Care sectors may benefit. WW Better relative valuations and central bank support in overseas markets suggest that investors should consider non-U.S. opportunities.

Despite recent turbulence, global developed-market stocks are well positioned to continue their history of rate cycle outperformance. Emerging markets are less attractive due to the economic slowdown in China and low commodity prices. Visit us at www.tiaa-cref.org/assetmanagement for additional information about TIAA-CREF’s equity capabilities. Source: Morningstar Source: Morningstar This material should not be regarded as financial advice, or as a recommendation or an offer to buy or sell any product or service to which this information may relate. Economic and market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments. This report is prepared by TIAA-CREF Asset Management and represents the views of Saira Malik. These views may change in response to changing economic and market conditions.

Any projections included in this material are for asset classes only, and do not reflect the experience of any product or service offered by TIAA-CREF. Past performance is not indicative of future results. The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate.

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