Even 'safe' bond investments falter as markets tumble

[Judi Lynn]

Source: Associated Press


Stan Choe and Sarah Skidmore Sell, Ap Business Writers
Updated 3:55 pm, Friday, February 9, 2018

NEW YORK (AP) — The stock market isn't the only thing dropping. Bonds, which are supposed to be the safe part of every investor's portfolio, have faltered, too.

In what's been a rude awakening for some investors, bond funds have lost ground these past couple of weeks, unlike in past downturns for stocks. What's different this time is that the same things undercutting stocks are hurting bond prices: worries about inflation and the possibility of much higher interest rates.

Bond losses have been more modest than the setback for stocks, but more may be on the way. And swings in bond prices are likely to become more common than in recent years, when returns were unusually smooth, experts say.

Nevertheless, experts are sticking with the mantra that bonds will be safer than stocks and that investors can continue to count on them as a stabilizing force for their portfolios.

Read more: https://www.chron.com/news/us/article/Even-safe-bond-investments-falter-as-markets-12577141.php

[bucolic_frolic]

1. Stimulating a full employment economy is guns & butter

as the 60's economists called it. You will get inflation. And the bust will be grand because QE1,2,3,4,5,6 funded everything and gave us overcapacity. So when interest rates head up, profits will vanish, and shutdowns will be severe while the currency devalues due to stagflation. The hardest problem ahead is finding a safe place to hide.

[AtheistCrusader]

2. Exactly this.

Why the FUCK are they trying to stoke a generally healthy, if evolving, economy?

The tax cuts and increase in spending together, is sheer madness.

[AtheistCrusader]

3. There are no 'safe' investments.

Show me a person who holds a 'safe' investment, and I'll show you someone who can and possibly will, lose their ass.

[CountAllVotes]

6. I have one

Series I inflation bonds.

Considered low risk.

Would not recommend buying them now as the bottom line on them is .1%.

The ones I have were issued in 2000 and the bottom line on them is 3.6%.

Glad I never sold what has turned out to be the best investment I have going that you cannot lose money on. Just wish I had bought more of them.

[SkyDaddy7]

7. Canadian Cannabis stocks

Have been gold mines over the past year...I don’t see that changing.

[AtheistCrusader]

11. Legislative activity could burn them to the ground, but

like you I consider that unlikely.

[paleotn]

8. Depends on your definition of safe.

Nothing in life is completely safe. But some things have better probabilities than others.

[AtheistCrusader]

12. Totally agree.

I just balk at the mindset of 'safe'. Anything posited as 'safe' is being oversold, or potentially subject to outright looting.

[gibraltar72]

4. Relax everyone

The market is just heeding Trump. He predicted we'd get so tired of winning we'd say stop no more winning. The market is clearly tired of winning. In fact sick of winning.

[Yonnie3]

5. I've never heard a true expert say "bonds will be safer than stocks"

I've heard experts say bonds have less risk than stocks. The "mantra" I learned in an intro level finance class was that bond returns over time are not highly correlated with stock returns over the same time period. There are also many types of bonds with different correlations to stocks. Some of the time, their price doesn't move in the same direction as stocks' and gives a portfolio of stocks plus bonds less overall volatility.

Less risk does not equal safe. The least risky example I can think of is a United States Treasury. If you buy one you will get all your money back at maturity and interest along the way. This has two main risks. There is the risk that the United States will not pay when it matures and that the purchasing power will have eroded through inflation so that the interest payment did not cover the difference. All bonds have these risks.

There is plenty of information about this on the web.

[blitzen]

9. What a crappy article...as if these "AP Business Writers" don't even know what a bond is...

I imagine they probably do, but they make no effort to inform their audience about the all-important difference between bonds, bond funds, bond prices, and bond returns. For instance, they don't explain that if you buy a bond and hold it to maturity, you will receive exactly what you bargained for (assuming the issuer doesn't default, which is relatively rare)--and so in that case the "market" is entirely irrelevant.

[D_Master81]

10. Bonds move inversely to interest rates

So anyone thinking bonds are safe now isnt being transparent. We are essentially at the worst time ever to hold bonds i would think. Extremely low int. rates w/ nowhere to go but up and signals of an improving economy overall, wages going up slightly and whispers of rising interest rates in the near future. Bonds are kind of a hedge against a portfolio collapsing, but buying bonds now you might as well expect to lose money.