The 2024 Global Survey of Financial Advisors from Natixis Investment Managers has brought to light a significant trend among investors. They are showing ongoing hesitation in moving out of cash and into bonds. This survey, conducted between June and August 2024, involved 2,700 financial professional participants from 19 countries.
Uncover the Insights on Investors' Bond Allocation Dilemma
Investors' Hesitance to Move from Cash to Bonds
The 2024 Global Survey clearly indicates that a large majority of investors are reluctant to shift their funds from cash to bonds. As stated in the survey, 89% of the 2,700 advisors surveyed said they have faced challenges in increasing fixed income allocations in client portfolios. This ongoing uncertainty around inflation and rate cuts is acting as a notable hurdle for many investors.During the presidential election period, the path of inflation becomes more complex. If potential inflationary pressures pick up in 2025, a higher-for-longer rate environment could pose challenges for the bond market. In fact, 48% of financial professionals reported interest rate policy uncertainty as a motivating factor for clients not increasing their bond exposures.Cash and Cash Alternatives: A Safe Haven
Cash and cash alternatives like money markets have proven to be a safe and lucrative investment during times of rising and peak interest rates. Now, with rate cuts in progress, investors seem reluctant to leave the safety of these havens. Overall, 43% of advisors attributed the clients' staying in cash to the lack of a clear, financially beneficial alternative.Another 39% of advisors explained that it has been difficult to showcase the benefits of increasing fixed income allocations in general. Moreover, 39% of advisors believe that their clients' lack of knowledge about fixed income makes it more challenging to encourage them to move out of cash.The Specter of 2022: Stock and Bond Correlations
The memory of 2022, with its stock and bond correlations and significant drawdowns, continues to haunt investors. The decadelong underperformance of bonds in the 2010s also doesn't boost investors' confidence. Bonds generated relatively muted returns while the Fed's support remained in the markets, overshadowed by the extended bull run of equities.In an environment of elevated but declining interest rates and the Fed's ongoing quantitative tightening, fixed income starts to look like an attractive alternative to cash. Educating clients about the benefits and role of fixed income in their portfolios can lead to greater confidence. This, in turn, may help investors overcome their reluctance and make the move from cash to bonds.For more news, information, and analysis, visit the Portfolio Construction Channel.