Happier Days Ahead

By Mike Zaccardi of HumbleDollar

STOCK INVESTORS are hanging tough. Bond investors? Not so much.

Citing flow of funds data from EPFR, Bank of America Global Research says investors collectively purchased $195 billion of stocks this year through June 22. The implication: People aren’t panicking. That’s great news, and it supports the narrative that today’s stock investors are less bullied by market volatility.

It’s a different story in the bond market, where we’ve seen so-called capitulation. Bank of America notes that $193 billion of bonds have been sold this year by investors. I’m concerned that many folks have given up on bonds, no longer viewing them as the safe alternative to stocks. Seeing globs of red on bond-fund performance sheets is no doubt discouraging.

But I think this pessimism is overdone. Why? The stock market may be unpredictable, often wandering far from what pundits perceive as “fair value.” By contrast, with bonds, we have a good sense of what future returns will be… read more