Bonds Continue to Demonstrate Their Value
While much of the attention has centered on stocks, the bond market has quietly delivered strong performance over the past two years. Bonds remain an important component of diversified portfolios because they help reduce risk, generate income, and provide stability during periods of market uncertainty. Since October 19, 2023, the total returns across the 11 major bond indices have been notably strong. That date marked the recent peak in the 10-year Treasury yield, which closed at 4.99%. Since then, Treasury yields have fluctuated significantly, falling to 3.62% in September 2024 before climbing back to approximately 4.5% in July 2026. Even with those fluctuations, today’s yield remains below the 2023 peak. Because bond prices generally move in the opposite direction of yields, declining benchmark yields have supported positive returns across much of the fixed income market. Several bond sectors have produced returns exceeding 20% during this period. Looking ahead, inflation and Federal Reserve policy will continue to play an important role in bond performance. Monitoring these factors will help determine how bonds continue to support clients’ long-term investment strategies.
Inflation Shows Encouraging Signs of Normalization
The latest Consumer Price Index (CPI) report provided an encouraging surprise. Monthly CPI declined by 0.4%, meaning prices actually fell during the month. This is significant because inflation discussions often focus on prices increasing at a slower rate rather than prices declining outright. Typically, inflation “coming down” simply means prices are still rising, but at a slower pace. This latest report was different. Consumers experienced actual price declines, something not seen on a monthly basis since the COVID era and a relatively rare occurrence over the past decade. Much of the decline was driven by lower gasoline prices following easing energy markets after geopolitical tensions earlier in the summer. Although oil prices have recently moved higher again, they remain well below previous peaks, suggesting that the recent decline may represent what a more normalized energy environment could look like. Perhaps even more encouraging was the strength of consumer spending. Retail sales increased by 0.22% during the same month that prices declined. When adjusted for lower inflation, consumers effectively purchased approximately 0.62% more goods and services than the previous month. This is an important distinction. During periods of rising energy prices, households often spend more filling their gas tanks while reducing purchases elsewhere, a phenomenon economists call demand destruction. Instead, the latest data indicates consumers continued spending across the broader economy while benefiting from lower prices. Although one report does not establish a long-term trend, the combination of falling prices and healthy consumer demand offers a positive glimpse into how the economy could perform as inflation continues to moderate. The outlook remains favorable for consumers, financial markets, and interest rates if this broader normalization continues.
Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here
Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Email Bobby Norman here
Trey Booth, CFA®, AIF®
Chief Investment Officer
Wealth Consultant
Email Trey Booth here
Ty Miller, AIF®
Vice President
Wealth Consultant
Email Ty Miller here
Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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