Now Is (Still) the Time to Add to Bonds
September 05, 2024
At the Federal Reserve’s annual Jackson Hole symposium, Chair Jerome Powell’s message was clear: The easing cycle is about to begin. With inflation moving toward its 2% target, the central bank has turned its attention to the health of the labor market. While we expect the Fed will likely deliver a 25 basis-point cut at its September meeting, a weaker jobs report could result in a larger cut of 50 basis points. Either way, rate cuts are coming.
With interest rates poised to fall, now is the time for investors to consider shifting from cash into longer-term bonds. Not only will investors lock in today’s historically elevated bond yields, but they can also enjoy potential price appreciation as interest rates fall. Historically, buying intermediate municipal bonds one month prior to an initial rate cut can result in nearly three times the total returns of cash over a one-year period versus waiting until after the rate cutting cycle begins.
For investors sitting with excess cash, the message is clear: There is still time to add to bonds.
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