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Category: Bonds

Lions and Tigers and Yield Curve Inversions

There are few things investors fear more than an inverted yield curve. Why? 2 reasons… The last 9 recessions in the U.S. were all preceded by an inverted curve (1-yr yield higher than 10-yr yield). Data Sources for all charts/tables herein: FRED, Bloomberg. 2. Weaker stock market returns tend to follow flat/inverted curves. Note: yield curve range is […]

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2018: The Year in Charts

These are the charts and themes that tell the story of 2018… I. All Good Things… …must come to an end. After 9 straight years of gains, the S&P 500 finished down 4.4% in 2018, its first down year since 2008. The record run from 2009-2017 thus ends in a tie with 1991-1999 for the […]

In markets, we often hear of these precise levels, beyond which everything is said to unravel.  The so-called “breaking point.” Their allure is undeniable. If such a point existed, one could fully prepare for it in advance, exiting unscathed before the stampede of the masses. Over the past few years, the most popular “breaking points” have […]

The Next 7 Years

What returns are you expecting from stocks and bonds over the next 7 years? This is a question that GMO (one of the largest and most respected asset managers) attempts to answer on a quarterly basis. Their most recent forecast was downright depressing: -2.2% per year from large cap U.S. stocks and +1.9% per year […]

Duration giveth, and duration taketh away. For much of the past 35 years, while interest rates were in a secular decline, duration (a measure of a bond’s sensitivity to changes in interest rates) was the best friend of bond investors. In 2018, it has become their worst enemy. At one end of the spectrum, you […]

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