Investor Account Access
Investor access to Shareowner accounts and Closed End Funds accounts.
Friday 12 January 2024
January 2024 | Strong fourth-quarter returns reduced US high yield spreads from 403 basis points over Treasuries at the end of the third quarter to 339 basis points at yearend. Generating positive performance with spreads at these levels is much more challenging than at the long-term average spread of 537 basis points since yearend 1996. Of course, positive performance can also potentially be generated from falling Treasury bond yields. The case for falling Treasury yields currently is built on the depth and cadence of Fed rate cuts, which we believe will be a function of decreasing service sector inflation and how much the US economy slows. Additionally, we continue to be concerned about defaults.
01 | Fourth-quarter high yield index performance was strongly positive, with a major rally in November and December offsetting October’s weak performance.
02 | Inflation data continued to drive the markets: In contrast to earlier in 2023, declining rather than increasing inflation swung the markets to gains.
03 | It now appears the Fed’s “higher for longer” stance was about keeping bond yields high to slow the economy instead of a true commitment.
Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of December 31, 2024 . Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the [author] and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.
RO ID# 3331659
©2024 Amundi Asset Management
For most of the last year, savers have been earning a reasonable return in cash. But how long can these compelling cash rates last? Historically, the answer has been: not very long. In every rate hike cycle since the 1970s, the US Federal Reserve has "paused at the peak" federal funds rate for a matter of months, not years, and history suggests the rate cuts could begin soon. Furthermore, once the Fed starts cutting its policy rate, cash rates could move hundreds of basis points lower in a very short period of time. We believe rotating from cash into short-term bonds can help investors reduce this reinvestment risk without taking on the full price volatility inherent in longer-duration fixed income exposures.
Megacap stock have delivered nearly all of the performance in US equity markets in 2023, and we believe the performance of these stocks relative to the rest of the equity markets is unsustainable. Apart from the megacap stocks, US valuations appear reasonable, with the S&P 500 Equal Weight Index trading at a 16x P/E ratio, in line with historical averages. As we enter 2024, we think investors will be best-served by diversifying away from megacap stocks into value stocks and reasonably priced growth stocks.
The Fed kept its benchmark overnight borrowing federal funds rate unchanged at 5.25-5.50% for the third consecutive meeting, that is, a period now spanning almost five months. The FOMC statement and press conference were more dovish than we - and the market - expected. This was exemplified in Chair Jerome Powell's comment that the Fed believes interest rates are at or near their peak in this cycle. Given a more dovish than expected reading from the Fed, government bonds and equities rallied sharply while the US dollar (USD) weakened. Specifically, the US Treasury curve steepened as yields declined in the 2-, 10- and 30-year segments by 22bp, 13bp and 9bp respectively. The major US equity indices all closed the day approximately 1.4% higher.
Before investing, consider the product's investment objectives, risks, charges and expenses. Contact your financial professional or Amundi US for a prospectus or summary prospectus containing this information. Read it carefully. To obtain a free prospectus or summary prospectus and for information on any Pioneer fund, please download it from our literature section.
Securities offered through Amundi Distributor US, Inc.
60 State Street, Boston, MA 02109
Underwriter of Pioneer mutual funds, Member SIPC.