Second Quarter, 2024
Is it Time To Get Into Fixed Income?
Lately, several of my colleagues have been asking me that very question on behalf of their clients. The short answer is YES!
Why and where should the money come from? Here’s the long answer:
- Now is an opportune time to rebalance your equity allocation and take some profits after an exceptional first half for stocks in 2024. See details on stock market performance in David Waddell’s Outlook 6/30/24 presentation, available for viewing on our website.
- Also, the timing is good for moving excess cash and money market funds to fixed income as the Federal Reserve is expected to cut its Federal Funds interest rate once (maybe twice) before year-end and several more times in 2025.
- As the Federal Reserve cuts its Fed Funds rate, money market yields are expected to drop.
- Yes, that is data-dependent, but the latest economic data suggest that the U.S. economy and inflation are slowing, and the next move by the Federal Reserve should result in a lower Fed Funds interest rate.
What if the Federal Reserve delays? Why not just stay in cash and money market until rates go down?
Even if the Fed is delayed, here is why you are getting paid well to wait by being invested in the W&A fixed income actively managed portfolio based on statistics from YCharts as of June 28, 2024:
- Current yield = 5.78%
- Credit quality = 86% investment grade and above.
- Opportunistic cash and money market = 22% to put to work as conditions change.
- Average price of the bonds in the portfolio = $93.22, which can increase to par 100 if held to maturity.
BOTTOM LINE: Is now a good time to invest in the W&A actively managed fixed income portfolio? We think, YES!
-Phyllis
