The bond market will bounce back from this year's historic rout to have a stellar 2024, Goldman Sachs Asset Management strategist says

  • Bonds are primed for a stellar 2024, according to Goldman Sachs Asset Management's Ashish Shah.

  • The asset class has staged a mini-comeback in recent months after October's collapse.

  • "This coming year is going to be the year of bonds," Shah said Friday. "So don't mess it up."

It'd be a big mistake not to be snapping up bonds right now, according to Goldman Sachs Asset Management's Ashish Shah.

Shah, who's the asset manager's CIO for public investing, said Friday that he's expecting fixed income to deliver stellar returns in 2024, amid signs the economy is slowing down and inflation is falling toward the Federal Reserve's 2% target.

"What I think we're seeing right now is not just a slowing in the economy, but inflation that is actually coming down, and that sets up a fantastic total return for the bond market," he told CNBC's "Squawk Box", highlighting quality bonds like mid-duration corporates and US Treasurys as particularly appealing.

"Take every opportunity you can when people get scared about what the Fed's doing to build your position," Shah added. "We've hit the mid-cycle, the Fed's hikes have had their impact on inflation, and this coming year is going to be the year of bonds. So don't mess it up."

Shah's "Year of the Bond" prediction echoes what much of Wall Street had been forecasting at the start of 2023, based on the widespread expectation that the economy would slip into a recession at some point this year.

Instead, US growth has held firm – and that's fueled a volatile 12 months for the asset class, which saw a three-year skid spiral into one of the worst routs in market history before staging a mini-comeback.

Yields on the benchmark 10-year US Treasury note spiked to a 16-year high of over 5% in late October but have since dropped by around 75 basis points. Bond prices rise when yields fall.

Investors' belief that the Fed is now done raising interest rates has powered the fourth-quarter retreat in yields. Traders are now all-but-certain that the central bank won't tighten again before starting to slash borrowing costs in mid-2024, according to the CME Group's Fedwatch tool. Bonds tend to benefit when rates fall because their fixed yields start to offer better relative returns.

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