Bonds Shine with Fed's "Higher for Longer" Call

WashingtonWise

28-09-2023 • 24 min

As the Federal Reserve continues to send the message that interest rates will stay elevated well into 2024, bond yields are the highest they have been in more than 15 years. In this episode, host Mike Townsend welcomes Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, to get her perspective on how bond investors can take advantage of what some are calling a once-in-a-generation opportunity. They discuss individual bonds vs. bond funds, corporate bonds, municipal bonds, and Treasury Inflation-Protected Securities (TIPS). Kathy offers her perspective on the latest Fed action and how the Fed may react if a government shutdown curtails its access to key economic data in the coming weeks. She also offers her considerations for how to make bonds part of a well-diversified portfolio, whether you are a long-time fixed income investor or a newcomer to the world of bond investing.

In addition, Mike provides the latest on the scramble on Capitol Hill to avert a government shutdown and looks at some of the implications of a shutdown for investors. He also takes a look at a new SEC rule that seeks to help investors understand what they are getting by requiring mutual fund and exchange-traded fund names better align with their goals and strategies.

WashingtonWise is an original podcast for investors from Charles Schwab. For more on the series, visit Schwab.com/WashingtonWise.

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Important Disclosures

Investors should consider carefully information contained in the prospectus or, if available, the summary prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling Schwab at 1-800-435-4000. Please read it carefully before investing.

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.

​​Indexes are unmanaged, do not incur management fees, costs, and expenses and cannot be invested in directly. For more information on indexes please see schwab.com/indexdefinitions

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risks including loss of principal.

Diversification and asset allocation strategies do not ensure a profit and do not protect against losses in declining markets.

Tax-exempt bonds are not necessarily a suitable investment for all persons. Information related to a security's tax-exempt status (federal and in-state) is obtained from third-parties and Schwab does not guarantee its accuracy. Tax-exempt income may be subject to the Alternative Minimum Tax (AMT). Capital appreciation from bond funds and discounted bonds may be subject to state or local taxes. Capital gains are not exempt from federal income tax.

Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.

Treasury Inflation Protected Securities (TIPS) are inflation linked securities issued by the US Government whose principal value is adjusted periodically in accordance with the rise and fall in the inflation rate. Thus, the dividend amount payable is also impacted by variations in the inflation rate, as it is based upon the principal value of the bond. It may fluctuate up or down. Repayment at maturity is guaranteed by the US Government and may be adjusted for inflation to become the greater of the
original face amount at issuance or that face amount plus an adjustment for inflation.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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(0923-3ATN)

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