Investing Insights Why the Bond Market Looks Brighter Than It Did in 2022
Feb 28, 2025
Dan Lefkovitz, a strategist at Morningstar Indexes, sheds light on the evolving bond market, discussing its recovery signs post-2024 interest rate cuts. Philip Straehl, Chief Investment Officer at Morningstar Wealth, emphasizes the risks of owning Restricted Stock Units and the necessity of diversification for total wealth. They explore the bond market dynamics, stressing bonds' stabilizing role amid market fluctuations. The conversation also addresses how personal financial goals play a crucial role in tailoring investment strategies to mitigate risks.
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Bond Market Volatility
- The bond market sell-off in January 2025 caused the 10-year treasury yield to rise to 4.8%, impacting bond values.
- However, the market moderated in February, with the yield returning to 4.5%.
Unexpected Yield Increase
- Despite the Federal Reserve cutting interest rates three times in late 2024, the 10-year Treasury yield increased.
- This was attributed to factors like the election results and persistent inflation concerns.
Election Impact
- The 2024 election had diverging effects on stocks and bonds, with stocks rallying and bonds falling.
- Bond investors worried about increased debt, deficits, tariffs, and inflationary pressures under the second Trump administration.