Is it a good time to buy bonds 2024?
Strong demand should support bonds in 2024
Vanguard's active fixed income team believes emerging markets (EM) bonds could outperform much of the rest of the fixed income market in 2024 because of the likelihood of declining global interest rates, the current yield premium over U.S. investment-grade bonds, and a longer duration profile than U.S. high yield.
After the record pace of interest rate increases, central banks could finally be in a position to offer monetary policy relief, which could lead to a decline in interest rates in 2024. As bond prices generally increase with declining interest rates, this could position bonds for another strong year.
Key Takeaways: Growth stocks may see a robust 2024 on the strength of trends such as AI disruption and decarbonization. Small-cap stocks are trading at attractive valuations as analysts see the possibility of a rebound in 2024. The time could be right for locking in rates on long-term, high-yield bonds.
| From and Including | Up To But Not Including | Rate |
|---|---|---|
| 3 years - 8 months | 4 years - 6 months | 4-1/2% |
| 4 years - 6 months | 8 years - 1 month | 4-3/8% |
| 8 years - 1 month | 12 years - 3 months | 4-1/4% |
| 12 years - 3 months | 15 years - 0 months | 4-3/8% |
Strong demand should support bonds in 2024
Many who left the bond market when yields were rising should return to lock in today's higher yields. The Bloomberg U.S. Aggregate Index currently has a yield of around 4.6%.
The top picks for 2024, chosen for their stability, income potential and expert management, include Dodge & Cox Income Fund (DODIX), iShares Core U.S. Aggregate Bond ETF (AGG), Vanguard Total Bond Market ETF (BND), Pimco Long Duration Total Return (PLRIX), and American Funds Bond Fund of America (ABNFX).
Once a Series I bond is five years old, there is no interest penalty for redemption. Question: Can you determine what the value of a Series I bond will be in future years? inflation rate can vary. You can count on a Series I bond to hold its value; that is, the bond's redemption value will not decline.
Overall, we believe that 2024 could be a rewarding time for global bond investors, assuming one treads carefully given the recent aggressive downward shift in rates and focuses on fundamentals and selectivity in building portfolios.
| ETF | Expense Ratio | Yield to maturity |
|---|---|---|
| U.S. Treasury 10 Year Note ETF (UTEN) | 0.15% | 3.8%* |
| iShares iBonds Dec 2033 Term Treasury ETF (IBTO) | 0.07% | 4.1% |
| Global X 1-3 Month T-Bill ETF (CLIP) | 0.07% | 5.5% |
| iShares 20+ Year Treasury Bond ETF (TLT) | 0.15% | 4.4% |
Should I move my 401k to bonds 2024?
Moving 401(k) assets into bonds could make sense if you're closer to retirement age or you're generally a more conservative investor overall. However, doing so could potentially cost you growth in your portfolio over time.
Infrastructure capital expenditure should accelerate in 2024, despite a higher cost of capital. Having held up well in 2022, global listed infrastructure underperformed global equities during 2023. This appeared to be primarily a reflection of macro factors.
- Diversify Investments. ...
- Focus on Growth over Gains. ...
- Tax Advantaged Accounts. ...
- Try House Hacking. ...
- Invest in CDs and Money Market Funds. ...
- Start Early. ...
- Stay the Course.
In its February Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.9% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.
After its December 2023 session, the Fed forecasted it would make three quarter-point cuts by the end of 2024 to lower the benchmark rate to 4.6%. Prices have started to come down, but the group has signaled it wants to see more positive data before pulling the trigger.
[D]uring the early part of the year, expect some bumpiness in rates as new economic data are released and as more buyers get back into the market. However, the overall outlook for mortgage rates in 2024 suggests more rate drops, with Bright MLS forecasts predicting rates to hit 6.2% by the fourth quarter.
If you are looking for reliable income, now can be a good time to consider investment-grade bonds.
“Yields are fairly high now, and high-quality bonds that you hold to maturity are safe investments,” he said. Mr. Pozen added that well-diversified investment-grade bond funds make sense now, too, for prudent investors who are prepared to hold them for at least three years.
Third, many Wall Street analysts predict that the S&P 500 will jump in 2024, but with a lower return than last year. Sure, they're guessing, just as I am. However, they think that moderating inflation and the potential for interest rate cuts should be good for stocks.
| Stock | Portfolio weight |
|---|---|
| Alphabet Inc. (GOOG, GOOGL) | 2.2% |
| Novo Nordisk A/S (NVO) | 2.1% |
| Liberty Broadband Corp. (LBRDK) | 1.4% |
| CRH PLC (CRH) | 1.3% |
Are Treasury bills a good investment in 2024?
There's still a lot to like about Treasuries. They offer some cushion against inflation, which has been running at about 3% and coming down. They could provide a hedge against a decline in the stock market if the economy weakens in 2024. And they also could rally if inflation continues to recede.
| Face Value | Purchase Amount | 30-Year Value (Purchased May 1990) |
|---|---|---|
| $50 Bond | $100 | $207.36 |
| $100 Bond | $200 | $414.72 |
| $500 Bond | $400 | $1,036.80 |
| $1,000 Bond | $800 | $2,073.60 |
Including bonds in your investment mix makes sense even when interest rates may be rising. Bonds' interest component, a key aspect of total return, can help cushion price declines resulting from increasing interest rates.
Taken together, these provisions allow issuers to make new loans from repayments for 10 years from the date of issuance of the original bond and thereafter, require that repayments of principal be used to redeem bonds. This is commonly referred to as the "10 year rule".
Stocks offer an opportunity for higher long-term returns compared with bonds but come with greater risk. Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you're diversifying your portfolio.
