Investing in fixed income is seeing renewed inflows as global

Investing in fixed income is seeing renewed inflows as global equities face earnings revisions. The Bloomberg US Aggregate Bond Index is up 1.2% month-to-date, boosted by stability in US Treasury markets and resilient corporate issuance. Fund managers emphasize duration control to balance rate sensitivity with coupon income. For workers, an emergency fund doesn’t just safeguard against a job loss. It can also be the ticket to covering surprise expenses without going into debt. And being retired doesn’t make you immune from surprises. So that means that not only are there more bonds in the market, but that price action could be more volatile because those buyers are more price sensitive. So that’s sort of what is driving that term premium higher. We’re kind of at that median point of where the term premium has been over the last few decades, which means the price action from here can be more symmetric. It could go higher if fiscal deficit concerns spike, but it could also go lower or investors can just harvest that risk premium in the form of extra return. Investing in fixed income remains backed by academic research showing lower portfolio volatility and improved Sharpe ratios when paired with equities. The Q2 2024 market data reinforces this, with mixed equity performance and steady bond total returns supporting diversified portfolio theory.