The rate on the benchmark 10 yr Treasury has increased roughly 100 bps over the past 2 months – peaking at around 3.5% before settling in at today’s 3.33% yield.

Some would argue higher rates will snuff out economic recovery. They would be wrong. Rates have been low for quite awhile and have done little to spur economic growth. The lack of growth (if such a thing truly exists) would be a function of tightened underwriting standards, lack of demand and uncertainty surrounding Card Check, Obamacare, extension of the Bush tax cuts, etc.

If the rush into Treasuries was the fear trade then the rush out of them is a growth trade. Shutter bonds and buy riskier assets like stocks and commodities.

Economic growth is the very reason rates are headed higher. Retail sales are up for the last 5 months. A strong holiday season will add to the good times. Manufacturing remains strong. CapEx is up 12.5% over the past year.

Another growth catalyst will be The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 better known as the extension of the Bush tax cuts. More money in our pockets means more spending and refreshed incentives for investment. Even businesses will benefit with the 100% cash expensing provision.

What’s it all mean? It means real returns are increasing as a result of economic growth. Manipulated, artificially low short-term rates aren’t needed and can only serve as inflationary. There’s no need for more quantitative easing. The Fed should turn off the printing presses and sink QE2.