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The Right Bonds for a Slower-Growth Environment

Metropolitan West CIO and manager Tad Rivelle says that investors should temper their economic growth expectations going foward.


Michael Herbst: And lastly, it seems, even though we are in the midst of a partial recovery in the fixed-income markets, you have commented a number of times that the rest of the recovery as it comes won't necessarily be smooth. Could you give some guidance in terms of what investors might be able to reasonably expect if they are thinking about making a fixed-income investment at this point and hoping to hold that fixed-income investment even for say the next three to five years?

Tad Rivelle: Well, I think that part of the conundrum is that likely as not, when you look back, economic growth in the U.S. and globally was driven to abnormally high levels because of the equity bubble of the late 1990s, the housing bubble of the earlier years of this decade, and we are not likely to go back to a condition that fosters such a vast amount of asset price appreciation. So the notion that we are going to go back to 3.5% or 4% real GDP growth we think is improbable. However, it is possible that you will get 4%-5% nominal GDP growth that will translate to a 4%-5% rise in national incomes.<TRANSCRIPT>

Michael Herbst does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.