Bonds' Pain Is Retirees' Gain

Plus: Why the budget deficit suddenly matters, Q4 markets outlook, the latest on inflation. [Morningstar](?utm_source=eloqua&utm_medium=email&utm_campaign=newsletter_smartinvestor&utm_content=48829&elqTrackId=fb743c6b20c74c37bab5938b4b185ccb&elq=0b62e89bf17e4cef898738c5354bea1e&elqaid=48829&elqat=1&elqCampaignId=24260) [Smart Investor] Smart Investor [Tom Lauricella, chief markets editor]( Connect with Tom on [LinkedIn]( [Tom Lauricella] In this week's newsletter: - [Bonds’ Pain Is Retirees’ Gain]( - [Why the Budget Deficit Suddenly Matters]( - [September CPI Report Shows Downward Trend for Inflation Intact, if Bumpy]( - [Q4 2023 U.S. Markets Outlook]( - [Despite Big Losses, Investors Flock to Long-Term Bond ETFs]( - [Is Tesla Stock a Buy Ahead of Earnings?]( Stocks have definitely gotten bogged down in the muck of the bond market. Now, for a lot of investors, the bond market is a mysterious and confusing place where good news is often bad news. But it also matters a lot. And that’s why we’ve been spending so much time digging into what’s happening in bonds and what it means. This week, bond yields swung back and forth, leading stocks around by the nose. As we [noted last week,]( there are a number of reasons bond yields are at their highest levels in 16 years, pushing toward 5%. In [our weekly Markets Brief]( we dig into one of the more surprising reasons for the selloff in the bond market: the widening federal budget deficit. Yes, the deficit isn’t new, but there’s a reason we’re suddenly paying attention. There is a significant silver lining to the beating the bond market has taken over the past year and a half: the high yields you can earn on the safest bonds. As John Rekenthaler explores, this has potentially important implications for retirees' portfolios. You can find what John has to say [here](. (And check out [Christine Benz’s broader look]( at what “higher for longer” means for your portfolio.) One interesting angle of the bond market selloff comes among ETFs, where investors have been flooding into funds focused on the most interest-rate-sensitive sector of the market: long-term government bonds. Why are investors jumping into a category that’s down 15% this year? Katherine Lynch [explains](. More broadly, Morningstar’s chief U.S. market strategist Dave Sekera and chief U.S. economist Preston Caldwell [offer up their outlook]( on where to invest in the fourth quarter. Lastly, it’s that time again: earnings season. We’ve got lots of earnings previews, as well as analyst commentary on the results. You can find outlooks for [Tesla]( [Charles Schwab]( [and Bank of America](. You can also find what our analysts had to say about [BlackRock]( [JPM]( and [Wells Fargo]( along with their takes on the big [ExxonMobil acquisition]( and [Dollar General’s CEO change](. That's it for the week! As always, check out our [Markets page]( for our latest coverage, live stock market updates, and our [weekly calendar]( of key upcoming data and events. Did a friend forward this email? [Sign up here](. [Bonds’ Pain Is Retirees’ Gain]( [Bonds’ Pain Is Retirees’ Gain]( Fatter bond yields permit higher portfolio-withdrawal rates. John Rekenthaler [Read More]( Share: [facebook]( [twitter]( [linkedin]( ADVERTISEMENT [media]( [media] Markets and the Economy [What’s Happening In the Markets This Week]( [What’s Happening In the Markets This Week]( Tesla, Netflix, banks, and big airlines report earnings; Sept. retail sales and housing starts. Tom Lauricella [What ‘Higher for Longer’ Interest Rates May Mean for Your Investment Portfolio]( [What ‘Higher for Longer’ Interest Rates May Mean for Your Investment Portfolio]( Don’t let hawkish talk from the Federal Reserve upset your financial plan. Christine Benz, Susan Dziubinski [September CPI Report Shows Downward Trend for Inflation Intact, if Bumpy]( [September CPI Report Shows Downward Trend for Inflation Intact, if Bumpy]( Inflation data seen giving Fed room to leave rates steady in November. Sarah Hansen [Inflation News: Steady Interest Rates Seem Likely ]( [Inflation News: Steady Interest Rates Seem Likely]( Plus, what consumers can expect from food and gas prices during this bumpy recovery. Preston Caldwell, Ivanna Hampton [Q4 2023 U.S. Markets Outlook]( [Q4 2023 U.S. Markets Outlook]( Our expectations for the economy, stocks, bonds, interest rates, and more. David Sekera, Preston Caldwell, Susan Dziubinski [Despite Big Losses, Investors Flock to Long-Term Bond ETFs]( [Despite Big Losses, Investors Flock to Long-Term Bond ETFs]( Locking in higher yields may be a draw for funds like the iShares 20+ Year Treasury ETF. Katherine Lynch [5 Top-Performing Small-Growth ETFs]( [5 Top-Performing Small-Growth ETFs]( ETFs from Vanguard, State Street Global Advisors, and iShares lead the pack. Sadhika Thapa [What Rising Bond Yields Mean for Q3 Bank Earnings]( [What Rising Bond Yields Mean for Q3 Bank Earnings]( Bank stock performance in 2023 has been driven by rates and not other fundamentals. Eric Compton [Falling Mutual Fund and ETF Fees a ‘Big Win for Investors’]( [Falling Mutual Fund and ETF Fees a ‘Big Win for Investors’]( Also, two Vanguard ETF picks and the firms trying to knock off the cheapest fund provider. Bryan Armour, Ivanna Hampton [Three Lessons From the 60/40 Portfolio’s Stumble]( [Three Lessons From the 60/40 Portfolio’s Stumble]( Balanced funds are sometimes dangerous—but can their risks be avoided? John Rekenthaler [How to Use Municipal-Bond Funds in a Portfolio]( [How to Use Municipal-Bond Funds in a Portfolio]( Some investors can improve their aftertax returns with munis. Amy Arnott [Earnings Season: What to Expect ]( [Earnings Season: What to Expect]( We think third-quarter earnings will generally be strong, but some sectors are more at risk. David Sekera, Susan Dziubinski [Going Into Earnings, Is Bank of America Stock a Buy, a Sell, or Fairly Valued?]( [Going Into Earnings, Is Bank of America Stock a Buy, a Sell, or Fairly Valued?]( We’ll be closely watching net interest income for clues on the profitability outlook. Eric Compton [Going Into Earnings, Is Tesla Stock a Buy, a Sell, or Fairly Valued?]( [Going Into Earnings, Is Tesla Stock a Buy, a Sell, or Fairly Valued?]( With likely lower profit margins and commentary on self-driving software, here’s what we’ll be looking for in Tesla’s earnings. Seth Goldstein [ExxonMobil: Acquisition of Pioneer Done at Fair Price With Sound Strategic Fit]( [ExxonMobil: Acquisition of Pioneer Done at Fair Price With Sound Strategic Fit]( Valuations for ExxonMobil and Pioneer seem fair. We see no impediments to the deal closing in first-half 2024. Allen Good Chart of the Week [Why the Budget Deficit Suddenly Matters]( [Why the Budget Deficit Suddenly Matters]( A jump in Treasury debt issuance is playing a role in the rise in bond yields. Tom Lauricella [Read More]( Share: [facebook]( [twitter]( [linkedin]( Recent Earnings [BlackRock Earnings: Lower Taxes Salvage Weak Flows and Performance]( Even with a downward revision, we view the firm’s stock as only modestly undervalued. [Wells Fargo Earnings: Like Last Quarter, Net Interest Income Outperforms]( Expenses rise, but we see Wells stock as undervalued. [Citigroup Earnings: Revenue Growth Is Working, but We Won’t Know About Expenses Until 2024]( We view the stock as undervalued, but caution that a lot of work remains for Citigroup. [UnitedHealth Earnings: Strong Results Boost 2023 Outlook, Setting Stage for Solid 2024]( UnitedHealth’s stock looks a little rich. [Dollar General: CEO Change Could Assuage Frustrated Investors After Tough 2023]( We expect management to prioritize investments more in store renovations and labor. [PNC Earnings: Some Fee Weakness, but We Like Net Interest Income Results]( While there will be continued headwinds for banking, we believe PNC stock remains undervalued. Future-Proof Your Strategy With Morningstar Investor Build a portfolio that's durable, no matter what the market throws your way. Subscribe to Morningstar Investor and get unlimited access to our powerful ratings and performance data, unbiased analysis on thousands of stocks, funds, and ETFs, and portfolio management tools that give you a deep understanding of your investments so you know when to make changes to keep your strategy strong. [Start your free trial today](. 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