There’s a torrent of good Covid vaccine news over the last two weeks. Pfizer and Moderna’s candidates exceeded expectations in terms of efficacy.  And a third, from AstraZeneca, is showing promising early results.  Many bond investors are hoping that eradicating the coronavirus brings back normal economic times and boosts interest rates to a level where passive, broad-based exposure to core bonds would provide returns in excess of inflation.

That rosy outlook for rates isn’t happening so far, even though records are being set in the stock market.  The U.S. yield curve flattened by 5 basis points, and the 30-year Treasury yield is down 3 basis points since the good vaccine news arrived.  That seems counterintuitive, until you consider the biggest influence on bond yields – Federal Reserve policy.  Fed Chairman Jay Powell and his team are committed to keeping interest rates low even after the economy recovers from the pandemic.  Bottom line, a back-to-normal economy is highly unlikely to improve the prospective returns on bonds.

Faced with those challenges, investors using a goals-based framework should consider seeking alternatives to traditional fixed-income holdings.  Depending on an investor’s risk tolerance, that could include holding more equities, alternative fixed-income market segments, or defensive equity strategies.  Retirees should consider increased equity exposure to meet spending goals.  Vaccines have changed the game for lots of things — the economy, public health, and our social and family lives.  But for interest rates?  Not so much.

To download a copy of this commentary, click the button below.

To discuss how we can empower you please contact us at 866.371.2399 ext. 202 or info@horizoninvestments.com.

Nothing contained herein should be construed as an offer to sell or the solicitation of an offer to buy any security. This report does not attempt to examine all the facts and circumstances that may be relevant to any company, industry or security mentioned herein. We are not soliciting any action based on this document. It is for the general information of clients of Horizon Investments, LLC (“Horizon”). This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any analysis, advice or recommendation in this document, clients should consider whether the security in question is suitable for their particular circumstances and, if necessary, seek professional advice. Investors may realize losses on any investments. It is not possible to invest directly in an index.

Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. This commentary is based on public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed herein are our opinions as of the date of this document. We do not intend to and will not endeavor to update the information discussed in this document. No part of this document may be (i) copied, photocopied, or duplicated in any form by any means or (ii) redistributed without Horizon’s prior written consent.

Other disclosure information is available at www.horizoninvestments.com.

The Real Spend® retirement income strategy is NOT A GUARANTEE against market loss and there is no guarantee that the Real Spend® strategy chosen by an investor will lead to successful investment outcomes for part of, or for the entirety of an investor’s retirement. This strategy is not an insurance product with payments guaranteed. It is a strategy that invests in marketable securities, any of which will fluctuate in value. Before investing, consider the investment objectives, risks, charges, and expenses of the strategy. Keep in mind investing involves risk. The value of an investment will fluctuate over time and will gain or lose money.

Horizon Investments and the Horizon H are registered trademarks of Horizon Investments, LLC

©2020 Horizon Investments LLC