Munis, Corporates Best as Rates Remain Stuck
Short-term rates are likely to stay low for another two years, and even when short-term rates start to rise, bonds will probably not “get killed" because yield curves will flatten.
It is still too early in this investment cycle to overweight cash and underweight bonds, says Jim Kochan, Chief Fixed Income Strategist for Wells Fargo Funds. Short-term rates are likely to stay low for another two years. Even when short-term rates start to rise, bonds will probably not “get killed" because yield curves will flatten. Arguments favoring cash or very short-duration strategies ignore the power of compound interest over 2-3 year holding periods. Therefore, investors should own sectors that provide the best coupon income, namely corporates and munis.
