What’s Happening With The Bond Market?
The bond market has been struggling as of late as yields continue to rise. With the 10-year treasury touching above 5%, it continues to negatively impact fixed-income portfolios. Additionally, dividend stocks are often affected by interest rate movements.
It is our view that this current situation will pass in the near term once we see muted inflation numbers. Will we see a continued slowdown in inflation? It’s hard to say, although inflation certainly is lower today than it was at its high point in 2023.
We believe having a portfolio strategy with lower durations helps reduce fixed-income fluctuation. Investors invested in the aggregate bond index may have certainly had a challenging time as interest rates rose and bond prices fell. Remember bond prices move inversely to interest rates.
While the short-term pain impacting bonds and dividend-oriented assets certainly is difficult, we are believers that a diversified strategy in the end will position portfolios for long-term success.
Here’s an interesting article about the bond market and its current direction. Excerpts are provided below.
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“Some investors believe a bond market selloff that has pushed the benchmark U.S. Treasury yield to 5% may have more room to run, as the Federal Reserve gives little indication of veering from its "higher for longer" mantra.
Fed Chair Jerome Powell walked a narrow line in his speech before the New York Economic Club on Thursday, saying the stronger-than-expected economy might warrant tighter financial conditions while also noting emerging risks and a need to move with care.
Still, some traders interpreted his comments as an endorsement of keeping rates around current levels through most of next year. Yields on the benchmark 10-year Treasury, which move inversely to bond prices, rose briefly to 5% late on Thursday, a closely watched level not seen since 2007. Stocks sold off on Thursday with the S&P (.SPX) down 0.85%.
“The underlying message is 'don’t be looking for a bailout from the Fed anytime soon,'” said Greg Whiteley, a portfolio manager at DoubleLine. "That gives people the go ahead to take rates above 5%.””
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We continue to monitor conditions. Adjustments will happen as we see opportunity and emerging risk.
