Finding income for investors was challenging during more than a decade of super-low interest rates. So was convincing some clients that allocating too much to the so-called safe side of their portfolio would jeopardize their financial goals in retirement. Although bond yields have yo-yoed since rebounding in 2023 and the Fed says it’ll cut rates again this year, financial advisors remain upbeat on fixed income.
“I think we’re going to get a pretty good year from the bond market,” says Patrick Bobbins, CFA, a Charlotte-based financial advisor with Wealth Enhancement Group. “I’ve been telling clients that I’m the most excited about bonds that I have been in probably 15 or 20 years.”
“Kudos to the bond market and the Fed for finally getting off of zero [interest rates],” says Bobbins, who leads the investment team for the Carroll Group at Wealth Enhancement Group. He was the director of investments and research at Carroll Financial Associates before WEG acquired the large independent RIA in 2021.
At the start of this year, the bond market was pricing in five or six rate cuts for 2024, he says, but that many cuts are unlikely barring a bad recession and a sharp uptick in unemployment.
And although yields have fallen from their October 2023 highs, they’re well above where they were a couple of years ago. “You look across the board, you’re getting anywhere from 5% to 10%, depending on the credit risk that you’re willing to take, and in some cases, 11% to 12% if you wanted to go into high yield or floating rate,” says Bobbins.
Read the full article and see Morningstar bond fund rankings in the inaugural issue of RT65. This issue focuses exclusively on fixed income.
