Advisors fear slow growth, see value in high-quality bonds: PGIM study
Uncle Sam is not the only one telling investors to buy U.S. bonds. Financial advisors are too.
PGIM Investments’ quarterly survey of advisors — conducted just before the banking turmoil in March and again in May — shows that financial advisors ranked Treasuries, municipal bonds and investment-grade corporate bonds as the most attractive fixed-income sectors in both the first and second quarters of 2023.
The results were a significant turnaround from last year, when advisors ranked Treasuries as one of the least attractive sectors.
The study also showed the two sectors gaining significant ground in the minds of advisors between the first and second quarters this year were agency mortgage-backed securities and asset-backed securities. The attractiveness of the former rose from 24% in the first quarter to 34% in the second quarter, while the latter rose from 12% to 22% over that time, according to PGIM.
“When interest rates were zero, investors looking to make any type of return in bonds had to stretch for yield. Now that interest rates are higher, investors seem to have remembered that equities are the best place to get ‘equity-like’ returns while high-quality bonds, at today’s interest rates, represent a reasonable hedge,” said Jon Swanburg, president of TSA Wealth Management.
Dean Tsantes, certified financial planner with VLP Financial advisors, said the juicy yields on Treasuries right now are making them an attractive investment depending on the client’s situation and time horizon. But he advises clients to diversify across fixed-income classes should the economic environment suddenly change.
“As soon as interest rates begin to drop and inflation eases, investment-grade bonds which have faced headwinds will be a
Read more on investmentnews.com
