Global Bonds Drop as Traders Reevaluate Rate Cut Expectations

Global bonds dropped and stocks posted mostly small moves as traders pared their expectations for interest-rate cuts in the face of changing economic conditions. Starting yields, potential rate cuts, and a return to contrasting performance for stocks and bonds could mean an attractive environment for investors looking for stable returns.

Yields are down from their 2023 highs, but there is still plenty for income investors to admire about investment-grade corporate bonds. In the parlance of capital markets, the higher-for-longer phrase has yet to dissipate as the economy continues to run hot and yields rise.

Franklin Templeton Canada has announced the expansion of its active fixed income ETF offerings with the introduction of a new ETF series, providing more options for investors seeking exposure to the bond market. The bond market's 2023 fourth-quarter performance proved to be a tough act to follow, with the Morningstar US Core Bond Index serving as a proxy for overall market performance.

Investors can screen for the best income-oriented bond funds among Fidelity's current lineup to find opportunities for stable returns with less risk than stocks. The best fixed-income investments help money grow with reduced volatility and less downside.

Research finds that bond laddering delivers comparable gains as reinvesting bonds each year, offering investors a strategy to manage risk and optimize returns in the bond market. With changing economic conditions and shifting interest-rate expectations, it's essential for investors to stay informed and adapt their strategies accordingly.