Yesterday the S&P 500 fell by 2.5%. At the same time, the Vanguard GNMA Index fund was up 0.2%. Having powerful counterbalancing bond funds like Vanguard GNMA in your portfolio can prevent you from taking massive hits to your wealth. Originally posted on Yoursurvivalguy.com. … [Read more...]

If yields rise above 3%, stocks will end the year down. That is according to Jeffery Gundlach, manager of the Doubeline Total Return Bond Fund. Gundlach is of course a bond fund manager, so one should take his views on stocks with a grain of salt, but he may not be wrong. Three percent yields aren’t high by historical standards, but global central banks have kept rates so low for so long that economies may have become overly dependent on ultra-low rates. Bloomberg reports: If yields on the 10-year Treasury break above 3 percent, there’s a high chance U.S. stocks will end the year down, … [Read more...]

When economic growth booms, Treasury yields often rise and the prospects for junk bond issuers tends to improve. In an environment where interest rates are rising because economic growth is strong, junk bonds tend to outperform Treasuries. Spreads (difference in yields) on junk bonds narrow as the risk of default falls in a better economy Don’t tell that to the crowd who has been reaching for yield in junk bonds though. As the FT reports, high-yield debt redemptions reached their second-largest net outflow, $10.9 billion last week. Central banks have distorted risk free yields for so long … [Read more...]

The bear market in bonds appears to be picking up steam. Strong employment and wage numbers this morning have pushed long-term Treasury yields past 2.8%—their highest level since 2013. Since the start of the year, 10-year Treasury rates have increased by 43 basis points or 0.43 percentage points. From a charting perspective, there isn’t much support for bonds until rates hit 3%. A welcome development in our view, but a not so pleasant development if you are among the investors who have reached for income by taking duration risk in the bond market. As of this morning, the Vanguard Long-term … [Read more...]

In September of 1981, 10-Year Treasury rates peaked at almost 16%. From that high, interest rates went on a three-and-a-half decade secular decline that colored every asset class in the world. Bond prices benefited from the decline in interest rates, but so did stocks, real estate, private equity, venture capital, and art among other asset classes. In July of 2016, the multi-decade bull market in bonds ended when the 10-year Treasury rate hit 1.31%. Rates moved up following the 2016 low, but only recently have they broken above their three-decade downward sloping trendline. The breakout may … [Read more...]

FOMO (fear of missing out) seems to be the dominant theme in the stock market YTD. Stocks are already up 4.2% in only 9 trading days, and on only one of those days has the stock market fallen. And fallen may be an overstatement. One of the major factors (though not the only one) that has enabled such a strong start to the year is the abnormally low level of long-term interest rates in the face of a domestic and global economy that looks to be humming. The 10-year Treasury rate remains below its 2018 high of 2.62%. Chasing return in stocks because bond yields are low has been an ongoing … [Read more...]

I’ve always been amazed at how quickly investors forget what it feels like to lose money. One of my favorite economists, whom will remain unnamed, is a constant stock market cheerleader. He’s never met a market he hasn’t liked. I love his optimism and I too believe, like he does, that Trump’s tax cuts will keep us chugging along for some time. But that doesn’t mean stocks will always rise like the sun. Where I take issue with this perma-bull economist is his call that the bull market in bonds is over. He also says that bonds, more than stocks, are in bubble territory. He takes the … [Read more...]

Complacency is a dangerous foe to a successful investment program. After one of the least volatile years on record in the stock market, many equity investors are complacent today. Though it is discussed much less, so are bond investors. Long bonds are the dog that never seems to bite, but that doesn’t mean they aren’t dangerous. As the WSJ describes here, some investors don’t seem to mind the danger of bonds. The latest pillar supporting the U.S. Treasury market: everyday investors. Ordinary investors are a growing force keeping longer-term bond yields low, even as the Federal Reserve … [Read more...]

I introduced the Dynamic Maximizers® portfolio to my Intelligence Report subscribers as a way to stay safe and dividend-centric during the next stock market collapse. The Dynamic Maximizers® portfolio is ideal for retired investors as well as conservative IRAs and education programs. My long-term total return goal for the Maxis is 3-9% per year with no down years and few double-digit up years. My median expected total return is thus 6%. Any 6% total return year I rate as a B. I expect mostly B and C years out of the Maxis portfolio, with zero F years and not many A years. The … [Read more...]