Bonds Will Deliver in 2021

Don’t rush to withdraw any 2020 profits from the market. 2021 is looking good.

illustration of money being put in a jar
(Image credit: Getty Images)

On Wednesday of election week, the Federal Reserve Board issued a statement, and the chairman gave a press conference. Let me summarize the Fed’s message in four words: More of the same.

That’s good news for income markets in 2021. It portends more positive returns, comparable to the 7% in 2020 on investment-grade corporate bonds or the 3.5% on Ginnie Mae mortgage pools. Any sense that inflation, interest rates and economic growth will escalate enough to erode bond values is mistaken, even if a viable COVID vaccine revs consumer and business confidence. Look at it this way, says PGIM Fixed Income economist Katharine Neiss, “A vaccine is less inflationary than a huge fiscal stimulus.”

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Jeffrey R. Kosnett
Senior Editor, Kiplinger's Personal Finance
Kosnett is the editor of Kiplinger's Investing for Income and writes the "Cash in Hand" column for Kiplinger's Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.