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Top Market Takeaways

Quick shot: Rates and fixed income

PublishedJan 9, 2025

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    Top Market Takeaways Quick Shot

      What do Jerry Maguire and our 2025 Outlook for rates and fixed income have in common? You had them at carry-like returns!

       

      As we dive into 2025, we see potential for another year of positive returns in stocks and bonds. With the Federal Reserve poised to continue its gradual rate-cutting journey, we anticipate a landscape where carry-like returns take center stage. What are carry-like returns? They are the income you earn from holding bonds or other fixed-income investments, mainly through regular interest payments rather than from changes in the investment's price.


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      Bonds play a crucial role in your portfolio, potentially acting as a buoy during market pullbacks and providing a reliable source of income. They also help diversify your investments and may reduce overall risk. For those who have enjoyed compelling yields on cash over the past couple of years, note that those yields have already fallen by more than 1% as the Federal Reserve rate-cutting cycle got underway. We don’t think reinvestment risk on cash is going away any time soon and now is the time to consider whether you’re holding onto excess cash and if it might better serve your financial goals invested elsewhere.

       

      As Jerry Maguire might remind us, "help me help you" with these opportunities by staying strategically positioned in fixed income.

       

      Please see “Outlook 2025: Building on strength” for additional insights on our year-ahead outlook.


      Many segments of fixed income now out-yield cash


      Sources: FactSet, Bloomberg Finance L.P., J.P. Morgan. Data as of December 31, 2024. Note: U.S. cash represented by the generic U.S. 3-month T-Bill yield, U.S. Investment Grade (IG) represented by the J.P. Morgan U.S. Liquid Index, Euro IG by the Bloomberg Euro Aggregate Index, Euro HY by Bloomberg Pan-European High Yield (HY) Index, U.S. HY by the J.P. Morgan Domestic HY Index, Preferreds by the ICE Variable Rate Preferred & Hybrid Securities Index, and Munis by Bloomberg Municipal Bond 10-year (8-12) Index. Note: Tax Equivalent Yield (TEY) tax calculation assumes highest federal income tax of 37% and a Medicare tax of 3.8%, excludes state and local taxes.
      The chart shows the yield for fixed income securities as of Jan 1 2024 vs the end of the year Dec 31, 2024 relative to the yield on cash is also shown.



      All market and economic data as of 01/08/25 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.


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      Global Investment Strategy Team

      J.P. Morgan Wealth Management

      The Global Investment Strategy group provides investment insights to help support long-term wealth goals. The team’s economists, investment strategists and asset-class specialists pair real-world economic trends with rigorous analysis to develop i...

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      Disclosures

      Our Top Market Takeaways for January 9th, 2025.

       

      The information presented is not intended to be making value judgments on the preferred outcome of any government decision or political election.

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