Value has been restored to fixed income. In a year that saw interest rates rise across the curve, the Federal Reserve (Fed) continued its campaign of rate hikes to tame stubbornly high inflation, and U.S. Treasury yields rose to the highest levels post-Global Financial Crisis (GFC). This drove historically attractive yields in fixed income, potentially boding well for future returns. Additionally, slowing growth and cooling inflation may potentially bode well for bond market performance in 2024. Bonds have historically provided attractive risk-adjusted returns in a post-rate-peak environment, while equity performance has typically been more challenged. The traditional 60/40 portfolio, out of favor with many investors, may be poised to make a comeback as the negative correlation between bonds and equities reasserts itself—meaning that bonds tend to do better when equities struggle, and vice versa.

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The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

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