2024: Cash Leads, but Will a Fed Pivot Change?

UBS suggests that in the coming months, the prime catalyst for fixed income performance will be securing steady returns through carry and income compounding.

In 2024, cash has emerged as a frontrunner, outshining many segments of the bond market, a trend delighting enthusiasts of a more relaxed investment strategy colloquially referred to as “T-bill and chill.”


A key factor propelling cash’s dominance over bonds has been the Federal Reserve’s cautious approach to rate cuts this year, as certain inflationary pressures have proven more persistent than initially anticipated.

Year-to-date, cash has yielded a total return of 1.8% by the end of April, surpassing the approximately 0.9% return from high-yield, or “junk,” bonds. Conversely, municipal bonds, investment-grade bonds, and agency mortgage-backed securities have incurred negative returns.

Leslie Falconio, leading a team at UBS global wealth management, noted in a recent communication to clients that the swift and significant uptick in interest rates during April adversely affected fixed income across various sectors. Notably, preferred securities, which blend characteristics of both stocks and bonds, experienced a notable setback with a -3.85% performance dip during the month.

Despite these challenges, Falconio’s team emphasizes the importance of capitalizing on carry and compounded income for optimizing fixed income performance moving forward. They highlight the recent opportunity to lock in higher yields, foreseeing a potential downturn in rates as summer approaches.


While bond yields have seemingly stabilized in May, pulling back from their earlier peaks following remarks from Fed Chair Jerome Powell, the future remains uncertain. Powell’s remarks indicated a reluctance to pursue further rate hikes unless prompted by cooling inflation or unexpected labor market weaknesses.

In the equities market, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite Index have all posted gains year-to-date, reflecting a contrasting landscape to the fixed income market.

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