In a world where stocks have been the go-to asset class for income and returns, bonds are making a comeback. That’s the view of Mary Ellen Stanek, Co-Chief Investment Officer of Baird Advisors and President of the Baird Funds, who says that the Federal Reserve’s aggressive rate hikes have made bonds more attractive to investors.
Stanek argues that the rapid rise in interest rates has created opportunities in the fixed-income market, as bond yields have increased to their highest levels in years. This means that investors can now lock in higher yields for their money, which can provide a valuable source of income and diversification in a volatile market.
In this interview, Stanek explains why she is convinced that bonds are back and why investors should consider adding them to their portfolios. She also discusses her investment strategy and how she selects bonds for her clients.
WEALTHTRACK Episode #2018 broadcast on October 27, 2023
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MARY ELLEN STANEK
- Co-Chief Investment Officer, Baird Advisors,
- President, Baird Funds
- Portfolio Manager, Baird Aggregate Bond Fund
- Portfolio Manager, Baird Core Plus Bond Fund
CONSIDER BONDS FOR INCOME ONCE AGAIN
Bond yields are once again higher than stock dividend yields. One example: the 4% plus rates being offered on U.S. Treasuries are at multi-year highs relative to the under two percent dividend yield offered by the S&P 500.
TREASURY INCOME ADVANTAGE as of 9/29/234.6% 10-year Treasury Yield
– 1.6% S&P 500 Dividend Yield
3.0% Yield difference
And for the first time in several years, bond yields are higher than inflation, meaning they offer what’s called a positive real return.5.39% Bloomberg US Aggregate Bond Index Yield
– 3.7% Core PCE
1.69% Real Yield difference
Morningstar’s “Thrilling 33” Chosen for:
- Low fees
- Morningstar medalist ratings
- Long-term performance
- Company quality
“Thrilling 33” Bond Funds:
- Baird Aggregate Bond
- Baird Core Intermediate Municipal Bond
- Baird Core Plus Bond
- Baird Short-Term Bond
- Baird Ultra Short Bond
- Dodge & Cox Global Bond
- Dodge & Cox Income Bond
- Fidelity Limited Term Bond
In a recent interview with Morningstar’s mutual fund maven Russ Kinnel, we talked about his popular thrilling 33 funds, a list narrowed from 15,000 fund share classes that make the cut based on low fees, Morningstar’s medalist ratings, long-term performance, and fund company quality.
BUY MUNICIPAL BONDS
- Tax-adjusted yields of 8% plus
- 8-9 year maturities offer some of the best values
FROM THE ARCHIVES
Mary Ellen Stanek from the WEALTHTRACK Archives…
MEETING THE CHALLENGE
Award-winning bond manager Mary Ellen Stanek describes Baird’s strategy to guide clients and colleagues through 2022’s bond market debacle.