• / Free eNewsletters & Magazine
  • / My Account
Home>CLS: A Bullish Case for Bonds

Related Content

  1. Videos
  2. Articles
  1. Higher Yields, Steeper Curve Spur Bond Buying

    Rising yields have made corporate bonds more attractive to some U.S. and foreign investors.

  2. Christine Benz's 6-Step Portfolio Checkup

    Morningstar's director of personal finance outlines how to gauge your portfolio's viability, evaluate your allocation, troubleshoot risk factors, and more in this special Web seminar presentation.

  3. Retirees: Beware of Complacency

    Christine Benz warns that a strong stock market may mean that retirees are overlooking some key risks.

  4. Christine Benz's Midyear Portfolio Checkup

    Christine recaps the market's activity for the first half of 2015 and provides a checklist for investors to use to evaluate their portfolios midyear.

CLS: A Bullish Case for Bonds


Sentiment in the bond market is decidedly bearish, and the financial media has been filling the airwaves with yet another round of calls for the end of the bond bull market. Should investors heed their warning? Is it time to sell out of bonds? Or, could the argument be made that bonds are actually attractive in the wake of such a selloff? To answer this question, we will again look to history for guidance.

We established that in the last 90 years, bonds have experienced a similar or worse selloff approximately 3% of the time. That means out of 1,091 months, 33 experienced a larger loss. How has the bond market performed after these past drawdowns? Would investors have been well served to sell out of bonds to prevent further losses?

The answer may be surprising. If an investor had sold out of bonds after each of the 33 months, he or she would have avoided further losses over the next 12 months just twice. The average loss avoided would have been -1.83%. In the other 31 instances, he or she would have sold just as the market was again turning positive and missed out on an average return of more than 8%. History shows that November’s experience has actually presented some very attractive buying opportunities. As Baron Rothschild famously said: Buy when the market’s nose is bloodied… or something like that.

The Russell 3000 Index is an unmanaged index considered representative of the U.S. stock market. The index is composed of the 3,000 largest U.S. stocks. The S&P 500® Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The Russell 2000® is an index comprised of the 2,000 smallest companies on the Russell 3000 list and offers investors access to small-cap companies. It is a widely recognized indicator of small capitalization company performance. The MSCI All-Countries World Index, excluding U.S. (ACWI ex US) is an index considered representative of stock markets of developed and emerging markets, excluding those of the US. The MSCI EAFE Index is a composite index which tracks performance of international equity securities in 21 developed countries in Europe, Australia, Asia, and the Far East. The MSCI Emerging Markets Index is a composite index which tracks performance of large and mid-cap firms across 21 countries classified as emerging market countries. The Barclay’s Capital U.S. Aggregate Bond® Index measures the performance of the total United States investment-grade bond market. The Barclay’s Capital 1-3 Month U.S. Treasury Bill® Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. The Bloomberg Commodity Index is made up of 22 exchange-traded futures on physical commodities and represents 20 commodities that are weighted to account for economic significant and market liquidity. An index is an unmanaged group of stocks considered to be representative of different segments of the stock market in general. You cannot invest directly in an index.The graphs and charts contained in this work are for informational purposes only. No graph or chart should be regarded as a guide to investing. This material does not constitute any representation as to the suitability or appropriateness of any security, financial product or instrument. There is no guarantee that investment in any program or strategy discussed herein will be profitable or will not incur loss. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance. Individual client accounts may vary. Investing in any security involves certain non-diversifiable risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any specific, or diversifiable, risks associated with particular investment styles or strategies.At certain places, we offer direct access or ‘links’ to other Internet websites. These sites contain information that has been created, published, maintained or otherwise posted by institutions or organizations independent of CLS Investments, LLC (CLS). CLS does not endorse, approve, certify or control these websites and does not assume responsibility for the accuracy, completeness or timeliness of the information located there. Visitors to these websites should not use or rely on the information contained therein until consulting with their finance professional. CLS does not necessarily endorse or recommend any product or service described at these websites.



©2017 Morningstar Advisor. All right reserved.