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| BondsOnline.com: instant access to and extensive coverage of over 3.5 million stocks, bonds, indexes and other securities covering major and emerging markets and exchanges across the globe. |
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| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| More |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Is This A Bond Bubble? Who Cares? |
A Wall Street Journal piece from Sunday dances around the topic of whether the bond market is looking a bit bubbly these days, but for most investors the question of whether there’s a bond bubble has little relevance.
“People ask ‘do you think it’s a bubble?’ and I say it doesn’t have to be a bubble to be a bad investment,” says Howard Ward, who manages the GAMCO Growth Fund. In his view, investors with a time horizon longer than the next 6-12 months are better served looking outside the bond market for returns.
Steady yield is one of the chief reasons investors fly to the safety of bonds in times of unease, and what has driven fund flows in the direction of fixed-income, but the majority of retail investors who tap the market through mutual funds “aren’t even collecting the full yield, because a bond fund never matures,” Ward says.
Meanwhile, many high-quality companies that are well positioned to withstand any near-term economic turbulence and capitalize on long-term growth are trading at reasonable prices yet out of favor with investors.
Lawrence Creatura, portfolio manager at Federated Investors, also points out the limitation of bonds in an inflationary environment. He readily acknowledges that inflation is of little concern at present, but when the economy picks up steam, being invested in companies that have pricing power and the ability to grow earnings and dividends will be more rewarding than holding bonds with fixed yields.
No matter what condition the economy is in, Creatura says, “people are still going to buy toothbrushes, hamburgers and gasoline.” With that reasoning, companies like Dow Jones industrial average components Procter & Gamble, McDonald’s and Exxon Mobil should be able to weather even a double-dip reasonably well, and all three boast dividends with yields better than that offered by the 10-year Treasury note, which sits right around 2.70%
David Chalupnik, head of equities at Minnesota-based First American Funds, says his firm’s equity income fund, which counts dividend-paying stalwarts like General Electric and Johnson & Johnson among its largest holdings, has been its best seller lately. “As money has begun to come out of fixed income and into equities [in September], that’s where it’s flowing,” he says, noting that investors who have been hunkering down for safety are more likely to take a cautious step into high-quality names that are likely to increase their shareholder payouts before moving onto higher-risk stocks.
That trend meshes nicely with Creatura’s view. “You can find pillars of the U.S. economy that are likely to grow future cash flow no matter the environment,” he says. Compared with the fixed cash flow stream of a bond, those willing to do the homework can reap bountiful rewards.
Follow my blog Exile On Wall Street, or Twitter @SchaeferStreet.
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| Stuff to look at |
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S&P Commentary and Newsletters: S&P
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| BondsOnline Advisor |
Income Security Recommendation January 2013 Issue.
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