Stock Versus Bond Performance
Source: http://feedproxy.google.com/~r/qvmgroup/yrMF/~3/YhCuy-lIUxE/3510Posted on Friday, May 1st, 2009 | In Market Commentary
Bonds have outperformed stocks in the past decade, and over significant periods over the past 200 years.
Index Universe published an excellent article by Bob Arnott on bonds performance versus stocks performance. We recommend reading it. From the article:
“Most observers, whether bond skeptics or advocates, would be shocked to learn that the 40-year excess return for stocks, relative to holding and rolling ordinary 20-year Treasury bonds, is not even zero.“
Arnott’s article reviews corporate bonds versus stocks from 1801 through now (about 208 years). He cites and graphs bonds outperforming over 62% of the time — not randomly, but in cycles. He identified 129 years of bond outperformance (68 years from 1803-1971; 20 years from 1929-1949; and 41 years from 1968-2009 YTD).
For these reasons, as well as the aging demographic of Baby Boomers who control a large portion of household assets, we think that bonds will assume a larger role in portfolios than previously.
That said, if the unprecedented government spending ongoing now creates high levels of inflation as some predict, bonds will suffer. Whether stocks would suffer too would depend on how much inflation and its impact on the overall economy. Stocks like some inflation, and dislike massive inflation.
Richard Shaw
QVM Group LLC
Last 5 posts by Richard Shaw
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 About Richard Shaw (http://www.QVMgroup.com)
Richard is a principal of QVM Group LLC, a fee-based investment advisor based in Connecticut with clients across the country. He provides investment coaching to "do-it-yourself" investors, and manages portfolios for those who prefer not to make their own decisions. His investment approach is based on value, asset allocation, benchmarking, expense control, risk management, customizing portfolios to each client's specific circumstances, and regular communication about strategy and performance. The QVM Group team also provides municipal refinance services, strategic business planning and financial analysis service for new ventures, private acquisition analysis, and custom investment research. Richard's extensive experience, includes serving on the Board of Directors of Aberdeen Asset Management PLC (London Stock Exchange: ADN), membership on the Board of Directors of Phoenix Investment Counsel (renamed Virtus Investment Advisors), a U.S. pension manager and investment advisor to the Phoenix Funds (renamed Virtus Funds), as well as serving as Managing Director of a series of offshore investment funds based in Luxembourg. He has led institutional asset management sales and had overall responsibility for management of a U.S. mutual funds broker-dealer. He was a charter investor and member of the Board of Directors of several internet companies, including Lending Tree prior to its IPO. He is a graduate of Dartmouth College. QVM Group LLC is a Registered Investment Advisor. Visit the QVM Group website http://www.qvmgroup.com/QVMinvest/ |
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