Should I Invest In Bonds When Interest Rates Fall? - 10/28/25 | Market Sense | Fidelity Investments

About this video

• Video Title: Should I Invest In Bonds When Interest Rates Fall? - 10/28/25 | Market Sense | Fidelity Investments
• Channel: Fidelity Investments
• Speakers: Heather Hegedus, Jurrien Timmer, Julian Potenza
• Duration: 24:59

Overview

This video discusses the current market conditions, focusing on the Federal Reserve's potential interest rate cuts, ongoing earnings season, and the performance of the S&P 500. It features insights from Jurrien Timmer on equities and macroeconomics, and Julian Potenza on fixed income and bonds, particularly in the context of falling interest rates and their impact on investment strategies.

Key takeaways

• Federal Reserve's Monetary Policy: The Fed is considering further rate cuts in response to cooling inflation (around 3%) and a slowing job market. The concept of a "neutral" interest rate (estimated around 3%) is a key point of discussion.
• Bond Market Performance: Rate cuts generally support bond prices, and the bond market has seen positive returns this year due to falling Treasury yields and tightening credit spreads.
• Quantitative Tightening (QT): The Fed is nearing the end of its QT program, which has acted as a minor headwind for the bond market by increasing supply and reducing liquidity. Ending QT is expected to be a tailwind.
• Tariff Impact: While initially concerning for the bond market, the economic impact of tariffs has been less severe than feared. They also act as a revenue generator for the government, potentially improving deficit forecasts.
• Fed Independence and Fiscal Concerns: Maintaining the Fed's independence is crucial for bond market stability. High government debt and deficits are a concern, but the market has largely priced in expected fiscal policies.
• Short-Duration Bonds: These are seen as an attractive option due to their lower sensitivity to interest rate changes, potential to lock in yield as rates fall, and reduced exposure to risks like fiscal concerns and Fed independence issues.
• Investment Grade Focus: Given tight credit spreads, upgrading credit quality to short-duration investment-grade bonds is recommended, as there's less compensation for taking on higher credit risk.