Bonds instead of stocks: Vanguard recommends long-term government bonds for investors

Bonds instead of stocks: Vanguard recommends long-term government bonds for investors

Should investors now focus on bonds rather than stocks? Vanguard, one of the world's largest asset managers, is now clearly in favor of government bonds. What's behind it and what investors need to know now.

According to a report from www.boerse-online.de, Vanguard describes the current period as a “cruel summer for bond investors”. Nevertheless, the world's second largest asset manager remains optimistic and recommends long-term government bonds. Vanguard believes that the economy could likely be in a shallow recession by 2024, so long-term government bonds remain attractive.

Yields on US government bonds have already risen significantly in recent months. Most recently, ten-year government bonds traded with a yield of over five percent for the first time since 2007.

However, Vanguard recommends caution when it comes to government bonds with shorter maturities. A possible economic slowdown could prompt the Federal Reserve to reduce its borrowing costs. This would put pressure on the prices of short-term government bonds, as they are more sensitive to interest rates. Vanguard therefore recommends committing to higher interest rates for longer, as the relative advantage of short-term government bonds could quickly disappear. This in turn increases the attractiveness of bonds with longer maturities.

Not only Vanguard, but also billionaire Bill Ackman of Pershing Square recently spoke out in favor of long-term bonds. According to Vanguard, the Federal Reserve is nearing the end of its interest rate hike cycle, making long-term bonds attractive because of their high yields and potential for capital appreciation.

Vanguard believes we are in a new era for fixed income, where bonds offer significantly more value - both in terms of overall return and as better ballast within an overall portfolio.

This recommendation from Vanguard and other experts may have implications for the Treasury bond market. With increased interest in long-term government bonds, yields may continue to rise, while short-term government bond prices could fall. This has implications for investors and the industry as they may need to adjust their investment strategies. Consumers could benefit from higher yields on long-term government bonds by receiving higher interest rates.

Overall, it appears that the asset manager Vanguard recommends long-term government bonds and cites an economic slowdown and the end of the Federal Reserve's interest rate hike cycle as the reason for this. This recommendation could have an impact on the market and cause investors and the industry to adjust their investment strategies.

Source: According to a report from www.boerse-online.de