In CNBC’s article “Where to generate income and safety during this global asset meltdown,” Michelle Fox quotes Collin Martin, fixed income strategist at Schwab Center for Financial Research, saying, “This is really attractive, especially considering that we have seen Treasury yields plunge so much, there might be some volatility here or there, especially if growth does slow, but we think the potential downside is relatively limited,” As the stock market sees a major drop, investors are increasingly looking for safer assets and those that offer income, driven by growing worries about a possible recession. On Monday, U.S. stocks fell sharply, part of a global sell-off triggered by a disappointing jobs report and concerns that the Federal Reserve may have been too slow in cutting interest rates. This broad market downturn reflects rising investor anxiety about the economic impact of these issues.
In response to the market turmoil, Treasury yields have dropped significantly, with the 10-year yield falling by over ten basis points early in the day. This drop shows a typical shift towards the safety of government bonds during market stress. Since bond yields and prices move in opposite directions, the lower yields mean higher bond prices, indicating that investors are seeking stability.
Collin Martin has updated his investment outlook because of these changes. Martin had earlier suggested extending bond durations to include intermediate, high-quality bonds, but these are now less appealing with the current drop in Treasury yields. While they might still be useful in a balanced portfolio, their reduced attractiveness suggests investors may need to rethink their strategies and possibly look for other opportunities if yields start to rise again.
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