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