Sunday
December 4, 2022
Hello everyone
We’re heading into the Christmas season. Everything starts to wind down in the markets.
You’ll either be hitting the ski slopes or securing your spot at the beach. Or it might be something quiet in-between.
Whichever it is, I’m wishing you all the fun in the world.
We got our swift pullbacks in the market on Friday, followed by a move in the same direction. In other words, short term= take profits, medium to long term = hold your position, for now.
There is often an argument between bonds and stocks over who is right in forecasting direction of markets in the future. Apparently, the Bond toffs always seem to win the argument and get in first. The stock market cowboys appear to come off second best – battered and bruised. So, analysts will look to the Bond market for clarity about what is going to happen with the economy and the stock market.
Bonds, - a crystal ball asset, - = capital preservation.
The bottom line is that bonds provide a historically less volatile, less risky, and more predictable source of income than stocks.
Bonds become more in demand than dividend stocks during a recession. This is because owning part of a company through the stock market is riskier than lending money with a bond. So, an investor would rather invest in a fixed income bond than in the stock market. Additionally, with interest rates on the rise, bonds will pay higher coupons.
I think I told you a while ago to check out Junk Bonds (HYG). From memory, the return is about 8%. Well worth looking at.
So, what does 2023 look like? Will investors lean towards Bonds or Stocks?
We first must answer the question as to whether the bear market is over. Inflation concerns may be in the rear-view mirror now, but the economic picture is still far from completely rosy. Morgan Stanley suggests that investors should consider reducing U.S. large-cap index exposure and look to Treasuries, Munis, and investment-grade corporate credit. It is a time to stay patient and collect coupon income.
Wishing you all an extraordinary week.
Cheers,
Jacque
"To live is the rarest thing in the world. Most people exist, that is all." - Oscar Wilde.
