Goldman Sachs Asset Management: "The bond market will have a stellar performance in 2024"

Fixed income will deliver stellar returns in 2024 amid signs the US economy is slowing and inflation is heading towards the Federal Reserve's long-term target of 2%, says Ashish Shah, chief investment officer at Goldman Sachs Asset Management, according to Business Insider.

"I think right now we're not just seeing a slowdown in the economy, we're seeing inflation really coming down, which creates the prospect of a fantastic total return for the bond market," Shah told CNBC, as quoted by Business Insider.

In his view, medium-term quality corporate bonds and US Treasuries are particularly attractive in current conditions. "We have reached the middle of the cycle, the interest rate hikes of the Federal Reserve have shown their impact on inflation, and next year will be the year of bonds".

The Goldman Sachs Asset Management executive's prediction echoes forecasts made by many Wall Street analysts earlier this year, based on expectations that the economy will enter a recession at some point in 2023. But the U.S. economy has remained robust , which brought volatility to fixed income assets, which had one of the weakest periods in history, followed by a mild recovery, according to Business Insider.

In October, the yield on ten-year US Treasuries rose above 5%, the highest level in sixteen years, before falling by about 75 basis points. There is an inverse relationship between bond prices and yields, so when yields rise prices fall. According to Business Insider, US Treasury yields fell in the fourth quarter as markets believed the Fed had ended its rate hike cycle.

Traders are now all but certain that the U.S. central bank will not tighten monetary policy again before starting to cut borrowing costs in mid-2024, according to the CME FedWatch Tool. Lower rates are beneficial for bonds, as their interest rates begin to offer better relative yields, the American publication writes.