Why Borrowing Costs May Stay High for a While
Gargi Pal Chaudhuri said investors should get used to higher long-term interest rates in early September 2026. Yahoo Finance Those rates help set home loans and long business borrowing.
Chaudhuri leads iShares investment strategy at BlackRock. MarketWatch Her comment came with BlackRock's Fall 2026 Investment Directions for advisors, built around AI swings, the midterms, rates and spread-out portfolios as competition for money grows.
That report said job growth averaged only +20,000 over three months. Chaudhuri separately described the second half of 2026 as featuring "a resilient U.S. economy, strong corporate fundamentals and AI reshaping opportunities." LinkedIn The economy kept going while hiring slowed.
BlackRock's August Institutional Outlook added that "the AI investment cycle remains strong." LinkedIn Focus stayed on company building spending, big cloud firms' finances and bonds from tech firms with good credit, even as jumpy rates made timing on long bonds hard.
Views have changed. In December 2023, BlackRock argued through MarketWatch that stocks and bonds paid off more when the Fed was on pause than in easing periods. MarketWatch At that point Chaudhuri said hikes were likely done but cuts would wait until the second half of 2024.
By April 2024, rising bond yields had not stopped tech stocks from leading the market. Yield is yearly pay as a share of price. Chaudhuri pointed to ETFs such as the iShares 1-5 Year Investment Grade Corporate Bond fund. MarketWatch That favored shorter company bonds over longer ones. In July 2024, she said she expected the Federal Reserve to cut rates twice in 2024.
That easing call carried into 2025. BlackRock's Fall 2025 Investment Directions said that despite restarting cuts in September, the Federal Reserve would likely keep rates above neutral for longer. BlackRock Fall 2025 Neutral is like a thermostat setting, neither heating nor cooling growth. BlackRock separately cited the Federal Reserve forecast implying 3.6% by the end of 2025 and 3.4% by the end of 2026. BlackRock
The broader context here is a move from waiting for cuts to living with higher rates. Steady rates, then short-bond income, then slow cuts above neutral, then higher extra pay for holding long bonds. Each step pulled two saver risks in opposite ways: having to reinvest at lower rates, or being locked in longer.
In my view, that explains the push to spread risk instead of betting on one rate move. Hiring is slow but activity holds up and AI spending is firm. That points to holding both short and long bonds, care in picking lock-in time, and watch on company cash paying for building. Short rates still help savers, while supply and extra pay for long bonds keep bond prices jumpy into the midterms.
