That setback has been potentially unsettling for older investors and retirees, who tend to keep a higher proportion of their portfolios in
the relative safety of bonds.
Equity markets fell as investors shifted to
the relative safety of bonds issued by the major countries — even though S&P had announced a downgrade of the US sovereign credit rating.
Because weak job growth may indicate a slowing U.S. economy, investors poured into
the relative safety of the bond market.
Of course, mortgage rates could move lower if investors head to
the relative safety of the bond market and drive yields down.
Even though fixed income investments pay next to nothing these days, investors continue to shun equities in favour of
the relative safety of bonds, just as they did during the recession.
With the European countries still struggling to figure their way out of the debt mess, and even the well regarded bank like JP Morgan taking large losses on their hedging activities, it is understandable that some investors may decide move their assets to
the relative safety of the bonds.
Consider your own investing strategy — if you can get a higher rate of return from
the relative safety of bond yields, would you not expect a higher rate of return to take on the higher risk of stock investment?
Not exact matches
This may not be palatable to fixed income investors, especially those who rely on their
bond portfolio as a source
of relative safety and stability.
It may also be that, with damage estimates
of $ 50 billion positioning Hurricane Sandy as second only to Hurricane Katrina in terms
of total losses, investors may be sticking with the
relative safety of the U.S.
bond market.
Having a mix
of bonds and stocks in your portfolio is a good way to take advantage
of the
relative safety and stability
of bonds, while taking potentially money - making risks with stocks.