Rolling to nowhere...unless you know how to profit from it
Bond returns are in the dungeon. That has and will continue to be a great source of investment return...on bonds!
I have written frequently this year that “bonds are way more interesting investments than stocks,” at least right now. That’s what happens when a 40-year bond bull market ends, as it did a couple of years ago. This changes EVERYTHING that investors have been taught about bonds, diversification, “balanced” portfolios, target date funds, etc. So I aim to cover this a lot at ETFYourself.com, so that our subscribers will be, as the Wayne Gretzky expression goes, “where the puck is going to, not where it is now.”
With long-term rates rising sharply, it is actually TBF, an ETF which shorts the long-term end of the Treasury market, where the gains have been had for a while. Again, being a flexible investor, and looking to profit and preserve capital from rising OR falling markets is what ETFYourself.com is all about!
Here’s what I see in that chart above. Across the bond yield curve, 1-year returns have been negative for a while. And to me, there are few concrete signs this will change soon. I wrote about this a few days ago in an article for Seeking Alpha that you can find through the link in bold green. I’m working on another article on the subject of awakening investors to the possibilities that exist by better-understanding how the bond market, and bond ETFs work. That is, how to research them and how to include them in portfolios.
Like I said above, EVERYTHING investors have come to assume about bonds has changed. It may reverse the other way a little in the coming years, but I don’t expect it to change dramatically.
Higher rates are good for savers, if inflation doesn’t screw it up too much
, and bond prices will at some point rise as rates moderate and eventually fall. But I’m not one of those investment strategists that sees that happening so quickly.