Many investors across the country are moving their money and investments from stocks over to bonds. The question that many investors are asking right now is simply this; should I be doing the same?
It’s a good question. For example, in the last week while the investors began moving their money from riskier stocks and emerging market currencies at such a high rate that the equity outflows in the United States have hit their highest levels on record while they move their money into less risky assets including bonds.
August of last year, when the stock market started a bull run off 12%, was the last time that bonds were more valuable than stocks. This follows four years of depressed bond yields and quantitative easing showing that, with the Feds recent decision to taper the bond buying program, the effects on the market are finally beginning to show.
The undeniable fact is that there were several prestigious and high-value bond funds that lost value in 2013. If investors begin to reallocate money from stocks to bonds however, that trend may well reverse itself.
In the last two weeks many of the biggest bond ETF’s (by market) have been steadily gaining value. It’s certainly been less exciting than last year’s bull market when everyone was tracking stocks but, as more investors began to seek out investments that are more stable, they’ve gained at least a few cents over the course of the last 14 days.
Of course there are always contrarians with counter arguments, and one of those arguments is that, with prices declining across the board, the massive selloff in the stock market is to blame. If you are a younger investor with a higher tolerance for risk, and you also believe that the United States economy is going to do well in 2014, a stock market selloff might be just the strong buying opportunity that you’re looking for.