News Brief from AXA Equitable: Highlights from recent notable market news reports
Nov. 4, 2011
Some of the biggest names on Wall Street who warned of a bond bubble have been humbled, with bond returns now exceeding those of stocks on average over the past 30 years, according to Bloomberg (“Say What? In 30-Year Race, Bonds Beat Stocks,” by Cordell Eddings, Oct. 31, 2011, Bloomberg).
As of the end of October, fixed-income investments were up 6.25 percent this year, nearly triple the rise in the S&P 500, according to Bank of America Merrill Lynch indexes cited by Bloomberg. Jim Bianco of Bianco Research told Bloomberg that the average annual gain in long-term government bonds over the past 30 years is 11.5 percent, higher than the 10.8 percent increase in the S&P 500.
“The generation-long outperformance of bonds over stocks has been the biggest investment theme that everyone has just gotten plain wrong,” Bianco told Bloomberg. “It’s such an ingrained idea in everyone’s head that such low yields should be shunned in favor of stocks, that no one wants to disrupt the idea, never mind the fact that it has been off.”
Nevertheless, the Bloomberg article cited analysts saying the bond markets outperformance probably isn’t sustainable over the long haul.
In fact, The Wall Street Journal reported that stocks are likely to continue rising through the final quarter of this year, noting that according to chart watchers, October is often a “bear killer” month (“Stocks Going by the Book,” by Jonathan Cheng, Oct. 31, 2011, The Wall Street Journal).
This October, the Dow rose 12% just as the market stopped short of tipping into what is generally defined as a bear market – a 20% decline from a recent peak.
“I couldn’t have scripted a smoother year,” Jeffrey Hirsch, editor-in-chief of the “Stock Trader’s Almanac,” told the Journal. Hirsch’s annual almanac compiles market statistics.
Robert Pavlik, chief market strategist at Banyan Partners, told the Journal, “I think the end of the year is going to finish pretty nicely for the stock market, though we could have some bumps along the way.”
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