Investment analysts polled by Bankrate expect Treasury yields to remain relatively flat over the next 12 months as the Federal Reserve’s rate hikes are likely over and the market is eyeing possible cuts. Bankrate’s first-quarter Market Mavens survey found that market experts see 10-year Treasury yields at 4.18 percent per year from now, essentially flat from 4.20 percent at the end of the survey period on March 22, 2024.
However, most survey respondents see interest rates lower in a year, with forecasts ranging from 3.50 percent to 5.0 percent.
“It has to be said that investors who have stuck with it over the past four years have been rewarded,” said Mark Hamrick, Bankrate’s senior economic analyst. “That’s despite the pandemic, historically high inflation, aggressive Federal Reserve tightening and a resurgence in the banking sector.”
Forecasts and analysis:
This article is one in a series discussing the results of Bankrate’s Market Mavens Survey for the first quarter of 2024:
- Survey: market professionals see interest rates on ten-year government bonds stable in a year’s time
- Survey: The stock market will rise 2 percent in the next year, experts say
- Survey: Experts say the best ways to ride stock market momentum and allocate cash
Ten-year yields are expected to remain stable over the next 12 months, analysts say
Ten-year Treasury yields have been below 5 percent for most of the past two decades, hitting record lows during the COVID-19 pandemic, when the Fed sharply cut rates to support the economy. At its low point, the 10-year yield reached about 0.50 percent in August 2020, but started to rise as the economy recovered. Interest rates rose steadily in 2023 as the Fed aggressively raised rates to combat inflation.
Investment professionals surveyed by Bankrate expect the 10-year yield to reach 4.18 percent at the end of March 2025, up from the 3.98 percent they expected at the end of December 2024, as indicated in the previous survey.
The survey’s estimates generally track the general trend in interest rates, with forecasts ranging from 2.19 percent in the Q4 2023 survey to 3.98 percent in the Q4 2023 survey.
Analysts see considerable return opportunities in fixed-income investments
Thanks to a rise in interest rates in recent years, returns on fixed income investments are as attractive as they have been in some time. With the Fed expected to start cutting interest rates in 2024, some analysts see an opportunity to take advantage of higher interest rates.
“Higher fixed income yields will be a headwind for dividend-related strategies and we would favor traditional fixed income strategies over these strategies,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. “On CDs, we would start to extend the maturity and lock in rates because the Fed will eventually cut rates, which will bring rates down in the short term.”
Brad McMillan, Chief Investment Officer of the Commonwealth Financial Network, also sees an opportunity before the Fed starts cutting spending.
“At current prices, CDs could be part of the cash or short-duration bucket of a diversified fixed income allocation,” McMillan said. “That said, we believe it makes sense today to add duration incrementally given where we are in the rate hike cycle.”
While there is an opportunity to earn higher returns from fixed income than has been the case in some time, most analysts say that long-term investors should still prefer equities.
“Longer-term investors would likely see greater total returns with income-oriented stocks than with CDs because stocks not only generate income but also offer price appreciation potential,” says Sam Stovall, chief investment strategist at CFRA Research.
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Bankrate’s Q1 2024 survey of stock market professionals was conducted via an online survey from March 13 to 22. Survey requests were sent by email to potential respondents across the country, and responses were submitted voluntarily through a website. Comments included: Dec Mullarkey, Managing Director, SLC Management; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Hugh Johnson, Chief Economist, Hugh Johnson Economics; Patrick J. O’Hare, chief market analyst, Briefing.com; Charles Lieberman, chief investment officer, Advisors Capital Management; Brad McMillan, head of investments, Commonwealth Financial Network; Michael K. Farr, president and CEO, Farr, Miller & Washington; Marilyn Cohen, CEO of Envision Capital Management; Sam Stovall, chief investment strategist, CFRA Research; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Kenneth Chavis IV, CFP, senior wealth advisor, Versant Capital Management; Chuck Carlson, CFA, CEO, Horizon Investment Services.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
