As the Fed gets ready to cut interest rates, should you buy into a bond ETF?

By Philip van Doorn

Also, Nvidia's expected sales growth through 2026, retirement planning as interest rates drop and advice from the Moneyist about family conflicts

Federal Reserve chair Jerome Powell has said the time has come for the central bank to lower short-term interest rates. So you can expect the Federal Open Market Committee to lower the target range for the federal-funds rate next Wednesday, following its two-day policy meeting. The federal-funds target range has been 5.25% to 5.50% since July of last year.

Investors have been piling into longer-term bonds for some time, which is why 10-year U.S. Treasury notes BX:TMUBMUSD10Y were yielding 3.65% early Friday, while three-month Treasury bills BX:TMUBMUSD03M were yielding 4.97%. High demand means rising prices and bond yields decline as prices rise. The bond market looks ahead.

In this week's ETF Wrap, Isabel Wang looked at actively managed exchange-traded funds that invest in bonds. It turns out this group has achieved better returns than passively managed funds that have lower fees. So that raises the question of whether or not you should load up on actively managed bond ETF shares heading into the Fed's rate cut next week.

More on ETFs: Value stocks outperform this quarter as growth equities struggle in 'downtrend'

Related coverage:

How to pursue high income with relative safety while diversifying your portfolioFed rate cuts aren't even here yet. Wall Street's booming commercial real-estate business isn't waiting.

What if you have saved, but have never invested in stocks or bonds?

Alessandra Malito writes the Help Me Retire column. This week she helped a reader who has done an excellent job saving up cash, but has always kept the money in savings accounts or CDs. The question now as the reader nears retirement and CD rates decline, is how can this money be invested to generate more income?

Related: Why so many investors are clinging to cash, CDs and savings accounts

A different retirement question: My husband, 75, is not eligible for Social Security. Is he entitled to my spousal benefits?

A mortgage lending catalyst

Lower interest rates might lead to another round of happy times for the U.S. mortgage lending industry. Aarthi Swaminathan summed up the changing mortgage rate landscape and outlined strategies for people considering a home purchase or a refinancing.

More: Mortgage rates plunge to lowest level since February 2023

What lies ahead for Nvidia?

Nvidia Corp.'s (NVDA) stock has returned 141% this year, with dividends reinvested. Last year it returned 239%. This action has been supported by the explosive growth of the company's revenue from expensive graphics processing units (GPU) being installed by data centers, whose own corporate clients need the computing power to support their development of artificial intelligence technology.

Can Nvidia's amazing sales growth continue? Why not take a top-down look at the semiconductor industry to see how rapidly major players are expected to increase their sales through 2026? Here's how Nvidia ranks on the list, based on consensus estimates among analysts polled by FactSet.

Additional coverage of Nvidia:

Nvidia's stock extends gains: 'The time to worry is clearly not now'Nvidia CEO Jensen Huang addresses the big question on investors' mindsBarron's: TSMC Stock Rises. Nvidia's CEO Has High Praise for the Chip Maker.

More trouble for Boeing

The big story for the aerospace industry heading into the weekend was a strike on Friday by aircraft assembly workers at Boeing Co. (BA). The workers rejected a labor contract their leadership had agreed to on Sept. 8.

Tomi Kilgore looked back at previous strikes against Boeing, and broke down the risks and opportunities ahead for the company.

Airline industry coverage:

Southwest Airlines to keep CEO despite Elliott's call of 'inadequate' managementDelta's stock rises on outlook and boost from lower fuel pricesAlaska Air lifts profit outlook well above forecasts, with help from CrowdStrike

Dividend stocks and dividend growth

When investors are looking to generate income, they want to know how much they will receive in dividends or interest payments immediately. But going after the highest yields in the short term can be very costly in the long term.

A different approach that might work out well over the years is to hold shares of companies that raise their dividend payouts steadily and significantly. Here are two lists of companies that have done that, with plenty of growth to go along with the rising income.

More on the stock market:

You don't invest in non-U.S. stocks? Here's what you're missing.Sell signs are all over the stock market now - but the bulls are holding out

Executive interview: Lumen

Last week Verizon Communications Inc. (VZ) made a big splash by agreeing to buy Frontier Communications Parent Inc. (FYBR) for $20 billion in cash. Verizon's management had apparently changed its strategy to build up its fiber-optic service network, in part by buying back some of the assets it had sold over the years to Frontier.

So what about Lumen Technologies Inc. (LUMN), which was known as CenturyLink until it changed its name in 2020? This is another company that was built in part by acquiring legacy land lines from Verizon and AT&T Inc. (T). But this year Lumen has been an exciting play for investors and traders, with the stock rising 445% since the end of June, as the company has announced deals to provide fiber-optic data transmission capacity to data centers.

All of a sudden, Lumen has become an AI-related meme stock.

Emily Bary interviewed Lumen Chief Financial Officer Chris Stansbury, who talked about the company's efforts to transform itself and be well-positioned as part of the "connectivity piece" of the AI infrastructure build-out.

Family business with the Moneyist

Quentin Fottrell responds to readers' questions about money - they often center on conflicts with family members. Here are recent examples:

Which of these two wills is valid?'He has never paid rent or utilities:' Do I have the legal and moral authority to charge my brother rent to live in our family home?'I don't want to be unfair': My mother gave me $150,000 to buy a house. One sibling wants 15% ownership. What now?

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-Philip van Doorn

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09-14-24 0516ET

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