According to a Bloomberg article, bonds with maturities of 10 years or more have lost around 46% of their value from the peak in March 2020. 30-year bonds have fared even worse, losing 53%. Some people are confused and I do not blame them. Was not fixed income as an asset class supposed to be at the lower end of the risk scale?
I’m hearing that some experts are warning that the “bond crisis” could get much worse from here. WTF (Welcome to Fantasyland)! Someone has said to me that what happened to the pound and gilts last year could happen to any developed markets including America.
Ugh! As wild swings continue to affect the bond market, probably thinking that having much more money makes his opinion counts more than others, hedge fund billionaire Bill Ackman said he has covered his bond short position as “there is too much risk in the world to remain short bonds at current long-term rates plus the economy is slowing faster than recent data suggests.”
Elsewhere, Bill Gross, also known as the bond king, is calling for a recession in the US by the end of the year. He sees the spread between the two-year and 10-year Treasury yields going positive before the end of 2023.
What to do as Halloween approaches? If you have been following me for a while, you know that I’m not another billionaire hedge fund manager and I don’t say splashy things to generate attention. Should you run for the hills and sell “everything” before the markets begin to fall again? That is just lazy thinking. I’m sure there is a more diplomatic way to put it but there is no more apt way to make that point.
If you are a long-time client and follow my cashing in on market trends, do nothing please, Jane. Stay the course and buy more if the markets go on sale. This is not easy to do and not often done in the real investment world. It really depends on individual risk appetite and expectations.
If you are a little overexposed to the risk assets and feeling uncomfortable with what is happening around you and you can’t stomach the short-term volatility, you may need to reduce your exposure or place some protection to avoid any blow-ups if the worst happens. We live in interesting times, but life goes on.