Thursday, January 5, 2012

P30Y, 20Y, 10Y, 1Y Bond Returns Exceed Stocks

Ibbotson Associates's SBBI bonds index, a broad bond measure, returned 28 percent in 2011, crushing the 2.1 percent return of the Standard & Poor's 500 (including dividends). 


The SBBI bond index has now returned 11.03 percent a year on average over the past 30 years, edging out the 10.98 percent return of stocks.  The bond index also topped stocks for the past 10 and 20 years.


Attributing factors, according to a cited USA Today / CNBC article include:
  • Distrust of stocks following a dismal decade which included double digit losses 4 times
  • Aging Americans searching for investment income
  • Historic declines in interest and inflation rates (obviously!)
However, if ever there was a time to employ the caveat, "Past results do not constitute future returns" it would be now:
  • ST rates remain near zero given accommodating Fed;
  • Continued deficit spending due to inability of federal and state elected politicians to make meaningful reductions in non discretionary spending (entitlements);
  • Longer term risk for return to higher inflation rates and weaker USD.

URL: http://www.cnbc.com/id/45887150/

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