It almost feels as though we’re all Fed watchers now. From March 2022 to July 2023, the Federal Reserve Board hoisted the federal funds rate (the rate banks charge each other for overnight loans) by 5.25 percentage points in a bid to crush inflation.
The inflation rate is down considerably but still a bit sticky, staying around 3%, and the economy continues to power ahead. Yet the Fed has signaled that it expects to cut rates in 2024 — it just hasn’t said when it will embark on its rate-cutting cycle. So now we’re waiting.
While we wait, some enticing yields are on offer across a wide range of asset classes for income-hungry investors — and, for a change, that includes bonds, a core income-producing asset. “One overarching theme is that fixed income is kind of back to normal, which means back to a world we haven’t seen in 15 years,” says Simeon Hyman , global investment strategist at ProShares. A case in point: You can now earn a real yield (that is, the yield after inflation) of about 2% on ostensibly risk-free Treasuries and other high-quality bonds — and much more in riskier high-yield bonds.
Stocks and energy-infrastructure securities provide both income and a growing stream of dividends, a quality that is especially important in providing protection against consumer prices mercilessly on the rise. Even-higher yields are available from closed-end funds and business development companies. Subscribe to Kiplinger’s Personal Finance Be a smarter, better in.