It seems like experts (ourselves included) have been forecasting the end of the bull market in bonds for years – and that is because they HAVE been doing so. In July 2010, bond guru Bill Gross predicted the 28-year bull market in bonds was near an end and, as interest rates moved higher, bond values would move lower. The Federal Reserve’s first round of quantitative easing had ended in March 2010, and he couldn’t know a second round, which would keep interest rates low, would begin in November 2010.
Since the U.S. election, investors have begun to favor stocks over bonds. Barron’s explained:
“BofA ML [Bank of America Merrill Lynch] said the weekly influx was the biggest into equities since December 2014. The outflows from bonds, meanwhile, was the largest since the taper tantrum of June 2013…The flight from bonds made for the biggest two-week loss in more than a quarter-century in the Bloomberg Barclays Global Aggregate Index, which fell some 4 percent, Bloomberg reports. The outflows from municipal and emerging market bond funds were especially acute, about $3 billion and $6.6 billion, respectively.”
The Wall Street Journal reported the yield on 10-year U.S. Treasuries finished last week at a 12-month high, after recording the biggest two-week gain in 15 years.
Will investors’ enthusiasm for U.S. stocks persist? Will this prove to be the end of the 35-year bull market in bonds? Stay tuned.
* These are the general views of Jonathan DeYoe and they should not be construed as investment advice for any individual.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
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* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The original was “Weekly Commentary” was prepared by Peak Advisor Alliance. Jonathan DeYoe is a member of Peak Advisor Alliance.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
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* “Is This The End of the Bond Bull?”