Will Fixed Income ever return?

[gbw]

I used to get a fair share of my income from fixed income investments - 2, 5, and 10 year Treasury Bonds, CDs, and so on. Rates used to run 4% or better on the safest notes and even higher for not much added risk.

No more of course, if you can find anything near 2% good on you. There isn't much. 10-year Treasury bond yield today is about 1.35%.

So far that's worked out ok because the equity side of things over the past years has more than made up the difference. But sooner or later, actually sooner, I'd like to reduce equity (stock) exposure and risk. It's been a great run but nothing lasts forever.

Perhaps some of you, neo-geezers like me, have the same question. Will we ever see 4% or 5% or better 10-year again?

 

[chevy]

I do not expect interest rates to rise much. The federal gov owes to much money.
If rates increase on CDs, then rates have to go up on loans & bonds. The increased interest costs just adds more to the national debt.

 

[MoKelly]

Rates will rise. The Fed has been buying $80 billion of Treasuries every month since the pandemic. This demand lowers the yields (demand raises bond prices thereby lowering the yield) but puts lots of liquidity into the economy.

The Fed has begin talking about eliminating/reducing these purchases. It’s a factor why the stock market has been struggling lately and went down today.

Stocks hate rising interest rates. A big reason stocks have done so well is the lack of alternatives - interest rates are too low. So, any talk of easing Fed bond purchases creates angst in stocks as they know this will increase interest rates.

Once the Fed buying goes away, bond rates will be back to reflecting inflation.

It may be 2022 before this occurs but it will occur. No government can artificially control interest rates forever.

MoKelly

 

[RickB]

I tend to agree with MoKelly. I’ve been moving towards stocks with stable and sustainable dividends and some bond funds with decent returns. Bond funds are one category I am comfortable relying on a experienced active managers. So far my results have been satisfactory.

 

[Doughknob]

I am sticking with stocks. So far my results have been Extraordinary! I plan to stick with them until the end.

 

[MoKelly]

I am sticking with stocks. So far my results have been Extraordinary! I plan to stick with them until the end.

Yikes. Hopefully the end is not near.

MoKelly

 

[Hay Dude]

I tend to agree with MoKelly. I’ve been moving towards stocks with stable and sustainable dividends and some bond funds with decent returns. Bond funds are one category I am comfortable relying on a experienced active managers. So far my results have been satisfactory.

Same here. Bond funds have been my second largest investment vehicle

 

[RickB]

I am sticking with stocks. So far my results have been Extraordinary! I plan to stick with them until the end.

I probably should have mentioned I maintain about 60% of our portfolio in equities of one type or another.

 

[MoKelly]

I probably should have mentioned I maintain about 60% of our portfolio in equities of one type or another.

Then you have had to rebalance often these past 2 years as the market has doubled.

MoKelly

 

[Doughknob]

Yikes. Hopefully the end is not near.

MoKelly

I hope not too! No, i just meant no plans to move into less risky vehicles as is typical as one gets to retirement.