Podcast Center
Video Center
Webcasts
Resource Center
Events
By 
March 07, 2024 at 01:47 PM
Expectations that the Federal Reserve will start cutting interest rates in 2024 have helped strengthen stock portfolios even as savers enjoy an opportunity to capture appealing yields in certificates of deposit, Treasurys and other low-risk vehicles.
As recently as Wednesday, stocks resumed their rally after Jerome Powell, the Fed chair, told a congressional committee that rate cuts are likely sometime this year, following the central bank’s aggressive rate-hiking campaign in 2022 and 2023 in an effort to wrangle inflation.
Bond markets could see a boost if the Fed does cut rates, Fidelity Investments noted in a recent post. Some estate-planning tools are sensitive to interest rates, so it’s worth exploring how the expected cuts could affect them, the fund giant’s wealth management business added.
Fidelity suggests that clients talk to their advisors and tax pros to make sure that any portfolio or estate-planning changes align with long-term goals.
Here are four tips on how rate cuts could affect client decisions about portfolios and estate-planning strategies — both before and after the Fed makes its anticipated move.
1. Benefiting from bonds now and after cuts.
After a challenging few years, bonds ended 2023 in good shape and could strengthen further in 2024 if the Fed starts lowering rates, Fidelity said.
Investors may have some incentive to buy bonds while interest rates and yields are high, since rate cuts will lower bond yields and raise prices, as Fidelity quoted a Strategic Advisers LLC institutional portfolio manager. Depending on maturity date, an investor holding bonds before rate cuts is likely to benefit, the portfolio manager said.
In the current high-yield environment, high-quality bonds can generate returns that the market hasn’t seen in a while, and bonds also can help investors diversify, even as rates decline if the economy weakens and stocks falter, another Strategic Advisers institutional portfolio manager said.
2. Setting up wealth planning savings before cuts.
Some wealth planning strategies may benefit clients more while rates are high while others could be more appealing when rates fall, Fidelity noted.
Investors may have an opportunity now, while rates are high, to shift significant assets from their taxable estate to a qualified personal residence trust or a charitable remainder annuity trust, the company said.
