Archive for June, 2013:

Bonds / Stocks and Interest rates

Written on June 13th, 2013 by Jamesno shouts

It’s been an interesting few years in the stock and bond markets with the unprecedented involvement of the Federal Reserve.  The question now as becomes what happens if they pull back or stop the QE program?  Just a hint of it saw interest rates spike over the past few weeks and dividend stocks and bonds take a big hit.  Pimco’s analysts have an interesting take on it.  Make sure to read the very last paragraph from Josh Thimens of Pimco:

Our secular investment outlook calls for a more defensive posture toward risk. Current valuations are extremely stretched. Since the end of the financial crisis, while real economic activity has failed to rebound forcefully, nearly all asset markets have in fact rebounded with force. We fear that the divergent trends between the real economy and financial markets may be unsustainable, even with a continuation of hyperactive monetary policy. In U.S. fixed income specifically, this suggests positioning for alpha rather than capital appreciation. The outlook also suggests a defensive posture toward credit risk and a focus on healthier parts of the capital structure and healthier segments of the economy, such as energy and housing. Finally, investors should consider an overweight in real assets (assets with the potential to rise in value when inflation increases) and a gradual withdrawal from those assets that are being so artificially supported by central banks. ” Josh Thimens of PIMCO.


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