The picture is fast brightening for fixed-income investors for the rest of 2023. Federal Reserve chairman Jerome Powell hinted (in his coy manner) in early May that the bank is finally done tightening credit and raising interest rates — good news for bond prices, which move in the opposite direction. Also, the stock, real estate and energy markets seem resigned to a broad economic slowdown. That implies a flight to safety.
Last month I suggested applying a “barbell” strategy to your savings or bond-fund assets, which means concentrating on short and long maturities while skipping the middle. With short-term rates up after the Fed’s May 3 announcement and long-term Treasury and investment-grade corporate bond prices on the march, as longer-term rates fall, I am extremely confident in my earlier prognostication that fixed-income devotees will recover half or more of last year’s losses by the close of 2023.
