Fixed-income investments have been making a comeback. After nearly 10 consecutive years of the Federal Reserve's near zero percent interest rate (ZIRP) policy, investors can get a risk-free return of almost 5% from short-term U.S. Treasury securities.
However, once the Federal Reserve announced plans to lower interest rates one, and perhaps multiple times in 2024, the flight to safety reversed. But inflation had other ideas.
The March 2024 reads on inflation show that the progress made in slowing the rate of acceleration is stalling, and it may even reverse. Higher oil prices and continued government spending are also fueling what many believe will be a continued rise in the inflation rate for much of 2024.
That means fixed income is back, right? Well, yes, and no.
The yield on 2-year Treasury bills is around 4.9% as of April 2024. That's attractive to fixed-income investors who want a safe place to park some of their portfolios.
But if you're looking for an alternative to fixed income, this is a good time to look for high-yield dividend stocks. These are dividend stocks with yields above or near the rate of return you can get from 2-year Treasury notes. And because they give you the added benefit of capital gains, these assets can keep your portfolio ahead of inflation.
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