[TSP_Strategy] Fixed Income Sector Performance

 

Fixed Income Sector Performance (Total Return as of 9/30/18)

Chart of the Week for October 26, 2018 - November 1, 2018

The fixed income market includes many different types of securities and performance can vary substantially among them. The chart above compares the performance of 11 major fixed income sectors for the 1-year periods ended September 30, 2018 ("current year" - dark blue bars above) and September 30, 2017 ("prior year" - light blue bars above). Three of the 11 fixed income sectors shown produced positive returns for the current year while eight of the 11 sectors produced positive returns in the prior year.

Over the current year, the U.S. Federal Reserve Open Market Committee (FOMC) increased the target rate range of the Fed Funds rate in every quarter, and the impact was felt across the fixed income sectors. The overnight federal funds rate target range went from 1.00%-1.25% to 2.00%-2.25%. Short-term yields generally rose faster than long-term yields and the yield curve generally flattened. Short-Term outperformed Long-Term over the current period in both the Corporate and Government sectors. High Yield (3.05%) was the best performing sector in the current year as credit spreads generally tightened.

Emerging Markets (-1.68%) and Global (-1.32%) returns were negatively impacted by expectations of tighter monetary policy in the Eurozone, a rising U.S. dollar, and political turmoil in countries including Turkey and Argentina.

Performance fluctuates over time and is hard to predict. Changes in both actual and expected interest and inflation rates can materially impact fixed income investments. Also, investors should note that even U.S. Government securities can decline in value and investing in sectors such as High Yield or Emerging Markets involve additional risk.

When making investment decisions, prudent investors should invest based on their own circumstances taking into consideration their goals, investment experience, time horizon, and risk tolerance.

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Posted by: sarah_oz@yahoo.com

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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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