December 1, 2020 FIXED INCOME WEBINAR Bonds, …
December 1, 2020
FIXED INCOME WEBINAR
Bonds, Bond Funds, and Bond ETFs
Beau Coash Institutional Portfolio Manager
Lee Sterne ETF Strategist
Kristin Moroz High Net Worth Bond Desk Consultant
Richard Carter Vice President, Fixed Income Products
Fidelity Brokerage Services LLC Member NYSE, SIPC
900 Salem Street Smithfield, RI 02917
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Agenda
Bond Market Context and Composition Individual Bonds Comparing Bond ETFs to Bond Mutual Funds Summary and Next Steps Q & A
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Bond Market Context & Composition
Beau Coash
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Interest Rate Environment
3.5
3
3.19%
Treasury Yield (%)
2.5
2
2.12%
1.5
1.46%
1
0.5
0 1 Mo 2 Mo 3 Mo 6 Mo
1 Yr 2 Yr 3 Yr 5 Yr
Term to Maturity
7 Yr 10 Yr 20 Yr 30 Yr
Source: ; as of 9/30/20.
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9/30/18
9/30/19
9/30/20
Past performance is no guarantee of future results.
Financial Conditions Are Easy Again
FINANCIAL CONDITIONS INDEX*
105 104 103 102 101 100
99 98
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
* Note: The Goldman Sachs Financial Conditions Index is defined as a weighted average of riskless interest rates, the exchange rate, equity valuations, and credit spreads, with weights that correspond to the direct impact of each variable on GDP. An increase in the index indicates tightening of financial conditions, and a decrease indicates easing. Shaded gray bars represent periods in which the US was in a recession.
Source: Bloomberg, Goldman Sachs as of 9/11/20.
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2020
Federal Reserve's Special Purpose Vehicles of 2020
Fed Program Available Capacity
$196.5B
Current Use
$3,423.5B
Source: Federal Reserve; as of 09/30/20
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Fed Program
Program Limit
Primary Dealer Credit Facility (PDCF)
Money Market Mutual Fund Liquidity Facility (MMLF)
Corporate Credit Facility (CCF)
Term Asset-Backed Securities Loan Facility (TALF)
Main Street New Loan Facility (MSLF)
Paycheck Protection Program Liquidity Facility (PPPLF)
Municipal Liquidity Facility (MLF)
Commercial Paper Funding Facility (CPFF)
$800B $100B $750B $100B $600B $670B $500B $100B
In Use $0.233B $7.088B $45.042B $11.715B $39.718B $67.573B $16.547B $8.589B
Productivity and Labor Force Growth
Real GDP Components
Year-over-Year Growth (20-Year Average)
Labor Force Real GDP
4.5% 4.0%
Productivity Peak (1949?1969): 3.0%
3.5%
3.0%
2.5%
2.0% 1.5%
Labor Force Peak (1962?1982): 2.3%
1.0%
0.5%
0.0%
Productivity
Labor Force Growth Labor Market Productivity Real GDP Growth
20-Year AART Projections 0.5% 1.2% 1.7%
2.1% 1.3%
0.8%
1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Haver Analytics,
Fidelity Investments Asset Allocation Research Team (AART), as of 12/31/19.
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Fixed Income Morningstar Categories Efficient Frontier
FIXED INCOME Morningstar CATEGORIES AVG ANNUALIZED 5-YR RISK/RETURN
10.0
9.0
8.0
Long-Term Bond
Avg 5-Yr Return Annualized as of 09/30/20
7.0
6.0
Multisector Bond
5.0
Int Core-Plus Bond
4.0
BBgBarc US Agg Bond Index Int Core Bond
World Bond-USD Hedged
World Bond
3.0
Nontraditional Bond
Short-Term Bond
2.0
1.0
0.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Avg Annualized 5-Yr Standard Deviation
Past performance is no guarantee of future results. Standard deviation shows how much variation there is from the average (mean or expected value). Low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data is spread out over a large range of values. A higher standard deviation represents greater relative risk.
Source: Morningstar Direct as of 9/30/20.
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