Our Coverage of the Pandemic's Market Impacts - Adviser Investments

Our Coverage of the Pandemic's Market Impacts

Today’s Market Takeaways: January 22, 2021

January 22, 2021

Join Vice President and Portfolio Manager Steve Johnson for his perspective on the themes and events that drove today’s market activity. If you have questions for Steve, please send them to info@adviserinvestments.com.

Today’s Market Takeaways: January 19, 2021

January 19, 2021

In our newest Today’s Market Takeaways video, Research Analyst Liz Laprade shares her perspective on the themes and events that will drive market activity this week. If you have questions for Liz, please send them to info@adviserinvestments.com.

Bond Market Outlook 2021

January 15, 2021
by Chris Keith, Senior Vice President, Fixed Income

2020 in Review

Mitigating risk in a low interest-rate environment has never felt so satisfying. The bond market rewarded investors with a respectable 7.51% return in 2020, nearly matching 2019’s 8.71% return, and ultimately living up to its reputation as the investment we rely upon to help balance risk in our portfolios.

That’s not to say the year lacked volatility: Even higher quality investment-grade bonds suffered during a few gut-wrenching weeks in March. In a classic flight-to-safety move, investors scrambled to buy Treasurys and the yield on the 10-year benchmark bond fell to 0.54% as investors sought refuge from the pandemic’s economic impact. (Remember, when prices rise, yields fall.)

The turning point for bonds arrived in late March, when Federal Reserve policymakers announced their intention to use whatever tools they could to support households, businesses and the economy. It was a case of words speaking louder than actions—and markets turned on a dime for the better.

In early August, the benchmark Treasury yield sank again, closing at an all-time low of 0.52%. Subsequently, yields have marched higher, ending the year at 0.93% and crossing above 1.00% early in 2021.

Our Outlook

Virtually all investment and economic outlooks for 2021 are predicated on moving past the pandemic. Recovery will truly begin when several safe and effective vaccines are in full distribution, something we expect to be the case by the end of the first or early in the second quarter. This should lead to a full reopening of schools, a return to the workplace and a surge in domestic and international travel.

What’s good for economic growth isn’t always a net positive for bonds, and we expect a tougher environment for bond investors this year: As the economy recovers and expands, interest rates may rise further, hurting bond prices. However, this will also lead to higher yields on every dollar invested or reinvested in the bond market. This higher income will begin to offset lower prices and eventually be a win for those who maintain, rather than reduce, their exposure to the bond market.

Bonds in 2021: A Snapshot

wdt_ID bondsin2021asnapshot

After years of no-to-low inflation, we expect it to rise, along with yields, in 2021. The Federal Reserve has targeted 2.0% inflation, and we think we’ll surpass that level sometime during the year (if only briefly). Runaway inflation is not in the cards from our vantage point, though.

Treasurys are the most sensitive bonds to interest-rate moves because they are considered “risk-free” from a credit perspective. By contrast, corporate bonds, with their higher yields, may better withstand an initial move higher in interest rates as investors assess their value based on other factors. We continue to favor corporate and municipal bonds in our portfolios while underweighting Treasurys. With the possibility of higher income-tax rates this year or next, municipal bonds will find greater appeal in the months to come.

Notwithstanding the above-average price gains earned over the past couple of years, the coupon return (income produced by bonds) has historically been the bigger driver of bond investors’ returns. In 2021, that income will be important as the long, 40-plus-year bond bull market may end its charge. Investors should be prepared to earn their yields, or slightly better, as the economy and inflation pick up speed.

Please call us at (800) 492-6868 or email us at info@adviserinvestments.com to discuss the role of bonds in your portfolio or to see if Adviser Investments’ Managed Bond Program is a good fit for you. Click here to read more about our approach.

For informational purposes only; not a recommendation to buy, hold or sell any investment product. Past performance is not an indication of future returns. All investments carry risk of loss and there is no guarantee that investment objectives will be achieved. Speak with a financial adviser before taking specific action. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

© 2021 Adviser Investments, LLC. All Rights Reserved.

Today’s Market Takeaways: January 15, 2021

January 15, 2021

Join Vice President and Portfolio Manager Steve Johnson for his perspective on the themes and events that drove today’s market activity. If you have questions for Steve, please send them to info@adviserinvestments.com.

Today’s Market Takeaways: January 12, 2021

January 12, 2021

Democrats now control the House, Senate and presidency for the first time since 2010. In Today’s Market Takeaways, Research Analyst Liz Laprade highlights 4 areas where we may see new policies and what it could mean for your portfolio.

Today’s Market Takeaways: January 8, 2021

January 8, 2021

Even after the events at the Capitol, markets continued to rally this week. In Today’s Market Takeaways, Vice President Steve Johnson considers why the market is rallying as he discusses economic data and the hope for further stimulus package.

Today’s Market Takeaways: January 5, 2021

January 5, 2021

2020 was a year for the history books. In Today’s Market Takeaways, Research Analyst Liz Laprade highlights what stood out most to her in the markets this year and reveals what she is paying attention to in 2021.

Today’s Market Takeaways: December 22, 2020

December 22, 2020

Bitcoin has been a hot topic lately. Will it ever replace gold? In Today’s Market Takeaways, Research Analyst Liz Laprade lays out the similarities and differences between the cryptocurrency and gold.

Today’s Market Takeaways: December 15, 2020

December 15, 2020

China’s stock market is up some 20% this year, but down about 2.5% in December. In Today’s Market Takeaways, Research Analyst Liz Laprade discusses how an executive order signed by President Trump last month could be negatively impacting Chinese markets.

Today’s Market Takeaways: December 11, 2020

December 11, 2020

With interest rates at all-time lows, institutional and retail investors are searching for alternatives. In Today’s Market Takeaways, Vice President Steve Johnson discusses Bitcoin and two significant IPOs this week from Airbnb and DoorDash.

Today’s Market Takeaways: December 8, 2020

December 8, 2020

This December is on track to being one of the busiest IPO months ever. In our latest installment of Today’s Market Takeaways, Research Analyst Liz Laprade discusses high-level similarities and differences in the IPO market today and the boom we saw in 1999.

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