Long-Term Bonds To Outshine S&P 500 In 2024, Asset Manager Predicts: 'You Get More Bang For The Buck'

The CEO of Howard Capital Management, Vance Howard, has made predictions about the financial markets that may surprise some investors. Despite the recent turbulence in the bond market, Howard suggests that long-term bonds could outperform the S&P 500 in 2024.

What Happened: Howard has been closely monitoring the performance of the iShares 20+ Year Treasury Bond ETF TLT. In an interview with CNBC, Howard shared that he began investing in this ETF a few weeks ago and has seen a 13% boost since the start of November, reported Business Insider.

“We’ve seen a really good rally in the bond market,” he added.

“I think it’s been very productive and positive, and I think people really to look at the bonds going into 2024. It may a better asset class than the S&P, even though we think the S&P is going to do very, very well.” 

Howard’s forecast comes with the expectation of inflation cooling down and the Federal Reserve making three rate cuts in the year ahead. This, coupled with the current oversold status of bonds, could spark a significant rally in the bond market.

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Despite witnessing a historic crash from 2020 to October this year, U.S. bonds have bounced back strongly. This recovery coincided with a shift in Wall Street’s expectations towards rate cuts by the Fed, resulting in bonds recording their largest monthly gain in nearly 40 years, thus offsetting losses for the year.

Howard also expressed his continued bullishness for tech stocks and predicted a bright future for small caps. He recommended the Invesco QQQ Trust QQQ as an attractive way to diversify an investment portfolio.

“I just think you get more bang for the buck with longer-term Treasurys right now,” Howard said.

Why It Matters: Long-duration Treasury bonds, which are a staple in many investment portfolios, have recently rebounded from a bear market that started in August 2020. This downturn led to a significant reduction in value, with a maximum drawdown exceeding 50% at their lowest point.

The iShares 20+ Year Treasury Bond ETF, a leading ETF linked to Treasury bonds and a widely-tracked barometer of long-term Treasury performance, formally entered a bull market following a remarkable 20% rally from its October lows.

This rally in bond prices has been driven by a combination of factors, including a continued deceleration of inflation and the Federal Reserve's remarkably dovish stance. The result has been a drop in yields on 30-year bonds from 5.2% to the current 4% over the past two months.

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