In 2024, long-term bonds are poised to potentially surpass the performance of the S&P 500, offering a more lucrative investment opportunity, according to Vance Howard, CEO of Howard Capital Management.
Speaking on CNBC, Howard highlighted the impressive recent performance of the iShares 20+ Year Treasury Bond ETF, noting its 13% surge since early November, a trend he believes will continue into the next year.
Howard emphasized the ongoing rally in the bond market, describing it as highly productive and beneficial for investors. His outlook for 2024 suggests that bonds may become a more attractive asset class than the S&P 500, despite his positive expectations for the latter's performance.
As inflation shows signs of easing, Howard anticipates the Federal Reserve will implement three rate cuts in the upcoming year, a possibility that central bankers have recently indicated. This expected policy shift, coupled with his assessment that bonds are currently "incredibly oversold," sets the stage for a substantial bond market rally, especially if the Fed proceeds with rate reductions.
Highlighting the historical context, Howard noted that U.S. bonds experienced a significant downturn from 2020 until October of the current year. However, they have since experienced a sharp rebound, driven largely by Wall Street's anticipation of a Fed pivot towards rate cuts. This shift resulted in bonds achieving their most significant monthly gain in nearly four decades, effectively offsetting losses incurred earlier in the year.
Howard expressed a particular favor for long-term Treasurys, suggesting they offer more value for investors at present. Besides his outlook on bonds, Howard remains optimistic about tech stocks, even after their substantial rise this year, led by the performance of the leading mega-cap tech companies, often referred to as the 'Magnificent Seven.'
Excluding these tech giants, Howard pointed out that the price-to-earnings ratios in the broader tech sector appear reasonable, indicating a promising investment landscape. He suggested that vehicles like the Invesco QQQ Trust could be an effective way for investors to engage with this market and diversify their portfolios. Moreover, Howard predicts a strong performance from small-cap stocks as the market continues to expand.
For wealth advisors and RIAs, Howard's analysis underscores the importance of considering a diverse range of investment opportunities in 2024, including long-term bonds, tech stocks, and small-cap equities. His insights provide a strategic perspective on portfolio diversification and the potential shifts in market dynamics in the upcoming year.
