Should high yield investors worry about the Fed?

James Mitchell, portfolio manager in global fixed income for Russell Investments, analyses the key risk factors for the high yield market as the Federal Reserve moves closer to raising rates.

We are just a few weeks away from a seminal moment, with the Federal Reserve looking likely to hike interest rates for the first time since 2006.  The last hike in mid-2006 marked the end of a tightening cycle which started in 2004, and saw rates gradually rise from 1% to 5.25%. There is much debate as to what this upcoming hiking cycle will bring to markets. Back in 2013, when the Fed announced it would be tapering its bond purchases - a precursor to hiking rates - the markets reacted badly.  In this so called 'taper-tantrum', the yield in the US high yield market jumped from 5% i...