Wealth Outlook 2024 - Slow then grow

52 Wealth Outlook 2024 | Portfolio views Peak rates equals peak income: extend duration US municipal bonds For investors eligible for the tax advantages, highly rated US municipals (“munis”) may be an interesting short- term fixed income opportunity. Munis generally pay a “tax-equivalent yield” near the equivalent Treasury yield ( FIGURE 4 ) . However, sometimes that tax-adjusted yield can be higher than Treasurys as it was earlier this year. When that occurs, the tax-equivalent yield, especially for US taxpayers in high-tax states, can offer similar yields to investment grade, except with government (i.e., very low) credit risk. FIGURE 4 Muni yields may be attractive for tax-advantaged investors Yield (%) 5yr AAA-rated Muni yield (TEY) 5yr US Treasury yield 8 0 6 4 2 2000 2004 2008 2012 2016 2020 2024 Source: Bloomberg as of November 22, 2023. Note: Tax equivalent yields (TEY) adjust for top Federal and Affordable Care Act tax rate (40.8%). SIFMA Municipal Swap Index Yield used for yr AAA-rated Muni yield. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. Real results may vary.