Blossom co-founder and CEO, Gaby Rosenberg says that their 2024 investment outlook anticipates that demand for the stability of fixed income will remain strong.
Blossom anticipates investor demand for the stability that fixed income offers to remain strong in 2024 as equity and property markets continue to experience volatility.
- The possibility of Interest Rate Cuts: Some investors are looking forward to the chance of interest rates decreasing in the first half of 2024, following a period of rate increases. This change in monetary policy could make fixed-income investments appealing because lower rates can lead to higher bond prices.
- Comparing Investment Options: When considering where to invest their money, many people find fixed income, such as bonds, more attractive than stocks, especially when the economy is sluggish, and inflation is falling. Bonds are seen as having good potential, stability, diversification, and attractive pricing compared to stocks.
- Protection Against Rate Increases: Even if inflation were to push central banks to raise interest rates again, current bond yields are viewed as providing a cushion against further rate hikes.
- Safe Haven: Fixed income was perceived in 2023 as a safe haven that provided stability and security during times of economic uncertainty and market volatility.
- Public markets, where companies sell bonds, have become safer than before. In the past, some bonds sold in these markets were very risky. But now, the private credit markets ensure that only less risky bonds are sold. This has resulted in a sanitisation of the corporate bond market. Banks used to take more risks by buying these risky bonds, but now, most of this risk-taking happens in the private credit markets. They have fewer rules, so they buy the risky bonds that banks avoid. In simple terms, the public bond market is safer because risky bonds are removed and managed elsewhere.
Also read: Money Market Funds: Poised to Fuel a 2024 Risk Asset Rally
Higher or lower?
Demand for fixed income is expected to remain stable or possibly increase in 2024. Investors’ growing confidence in the attractiveness of bonds, their preference for bonds, and the belief that interest rates have reached their highest point all indicate that demand for fixed income will continue or even rise.
Returns on fixed income are expected to be competitive and appealing in 2024, particularly when compared to other low-yield assets such as cash. It is anticipated that bond yields will decrease, potentially leading to capital gains for investors. The Blossom Fund prioritises holding high-quality assets, increasing Fortlake’s (Blossom’s fund manager) trading opportunities to continue to target 5.95% p.a. returns throughout 2024.
