Rates are on the rise, but don’t fear for the stock market — yet

The Federal Reserve roiled markets after it announced its second interest rate hike of the year, even though the decision was widely expected.

Although the gradual rise in borrowing costs may give some cause to grow cautious on equities, I'm still constructive on stocks and the economy — for now, at least.

Investors should remember, the 10-year Treasury yield is still well below its long-term average of roughly 4 percent. Indeed, the Fed is firmly on the path to interest rate normalization amid a robust recovery, but regardless, rates are far from historically elevated.

If the 10-year Treasury yield rises over 3 percent and marches toward 4 percent, a level it hasn't hit in a decade, investors may then begin to alter their outlooks for the economy and the market. After all, interest rates impact the economy from every angle, affecting spending by businesses and consumers and borrowing decisions, corporate buybacks, capital investment, earnings growth and more.

And of course, the stock market could be impacted. When rates are lower, bond yields look less attractive and investors are forced to look elsewhere, like the stock market, to earn a return on their money.

Treasury yields closed out the week largely down across the board, with the 10-year Treasury yield lower at 2.91 percent.