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Rekenthaler Report

Will Bond Funds Bring a Surprise?

The time may be right (that is, wrong).

Bad Thoughts
Almost always, when people are very angry at the mutual fund industry, it's because of bond funds.

Stock funds rarely deliver unhappy surprises. By now, people have a pretty good sense of how buckets of stocks behave. In the past quarter-century, U.S.-stock fund investors have been disappointed only three times. In 1987, they were caught out by the speed of the market's plunge (22% in a single day!); in 2000-02, by the depth of technology stocks' dive; and in 2008, by pretty much everything. Following all three occasions, redemptions ensued. Even then, though, most investors were disappointed in the asset class rather than in the funds per se. They realized that the funds had only gone where the asset class had led them.