Only six more trading days to conclude 2024, and the only asset class that is down for the year is the long Treasury bond. Several factors have contributed to the negative performance: (1) the budget deficit, where the U.S. continues to spend more than it makes, creating the need for more debt. (2) inflation worries, where the probability of having a second wave of higher prices is increasing, and may force the Fed to stop easing, which puts pressure on the long end of the curve, and (3) the attractiveness of the Equity market, which will end the year with a 25%+ return, making the 4% handle in the 30 year bond severely unnatractive. Over the last five years, only two have been positive for the long bond: 2020 and 2023. Both were special years where bonds rebounded after a shock. What will 2025 bring for long bond?
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