In September, the Federal Reserve announced that it would begin reducing the size of its balance sheet by letting some of its bonds mature without fully reinvesting the principal. This widely expected move marked another monumental step in normalizing U.S. monetary policy. There are likely to be several impacts from the Fed’s decision over the short and longer term. However, it is important to note that the Fed’s planned balance sheet “runoff” will take a long time. About half of Fed assets are in securities that will take more than a decade to mature. Given this slow pace of “run off,” barring any macroeconomic shocks, the balance sheet’s size is unlikely to fall to pre-recession levels. While the impact on rates may be modest, a well-managed bond fund should be able to help investors navigate a new era of monetary policy.
Any reference to a company, product or service does not constitute endorsement or recommendation for purchase and should not be considered investment advice.
American Funds are intended only for persons eligible to purchase U.S.-registered mutual funds.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
Securities offered through American Funds Distributors, Inc.
Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.