I have to admit I am impressed. Just like at the beginning of 2014 when 99.99% were saying bonds (10 yield Treasuries) were on their way to 4% (they were 3% at the time) Gundlach was the sole dissenter and predicting bonds were headed back to 2%. This time around when bonds recently hit 2.55% to 2.60% just about everyone was saying it would be a non stop rise to 3%. But Mr Gundlach again was a dissenter saying they would first trade below 2.25% before resuming their journey to 3%. They are 2.22% as we speak.
I guess the surprise here would be they never get close to 3% and fall below 2% or stay in the current range of 2.20 to 2.50%. I am not sure what has been the story of 2017 - the resilience of stocks or bonds. I am also wondering if there is some secular shift underway where bonds may trade in a low yield range for years to come. And that is from the baby boomers seeking safer and less volatile investments in retirement as they rotate out of equities. It sure has been a boom for the early boomers since 1982. It's liked they all woke up one day and began worrying about retirement shoveling money into stocks. Maybe now they are waking up again and shoveling money into bonds.
Comments
Regards,
Ted
https://www.bloomberg.com/news/articles/2017-04-04/gundlach-says-bond-rally-to-continue-with-10-year-yield-falling
S&P 500:
Jan 1, 1984 166.40
Jan 1, 1983 144.30
Jan 1, 1982 117.30
Jan 1, 1981 133.00
Jan 1, 1980 110.90
I have not dug through old data, but recall the end of August in 1982 as the turn around and the beginning of the upward run in U.S. equity after the beating of the mid-1970's.
An aside note, not directly related and may not be of any value, but the mid range of the boomers in 1992 was about 36 years old finding decent average earning/wage power at the time for perhaps the next 20 years before the slow turn down in earning power. Boomers, of course, have entered into the retirement phase and others entering at a 10,000/day rate, being 4 million/year. The reported birth numbers from 1946-1964 for the U.S. was about 76 million. A question as to whether there is enough money among this group to help support either equity or bond markets to the positive side. We here have read the reports of low savings rates for many boomers; and so there may not be enough power in this group to support any market area(s). The flip side being that the output/withdrawal period is in play, versus the prior period of input/investing. Whose/what money is going to support this withdrawal in order to support equity/bond returns to the positive side going forward???
Bond yield range: The current yields below have remained in this spread range for some time now; being about .6%; and traveling together. I do not recall any breakout in the 30 year to extend the yield above and beyond this .6% spread from the 10 year, for at least the past 6 months to 1 year period. For my non financial background and IMHO; I read this as continued low inflation as well as other twitches and wiggles, which may be related to high equity valuations and the big money (pension funds, foreign central banks, etc.) still maintaining "safe ground" and purchases while Euro area bond yields remain very low.
10 Year 2.25%
30 Year 2.90%
Note: most investment grade bonds lost a small piece of price ground today.
A few late in the day musings.
Take care,
Catch