For This Century, Stocks Lagging Bonds

In the race for returns since 1999, bonds are now outperforming stocks, according to a recent article in The Wall Street Journal.

FactSet data shows that since December 31, 1999, bond investors (data from the Bloomberg Barclays U.S. Aggregate Bond Index) have earned a cumulative total return of 176%, while the S&P 500 has risen by 149% over the same period. The comparative performance, the article notes, “underscores the extent of the recent carnage in the stock market.”

The article cites comments from Kathy Jones, chief fixed-income strategist at the Schwab Center for Financial Research, who said, “I’ve been hearing for decades how returns in bonds can’t continue to be positive because of low interest rates. But the truth is they just keep delivering positive returns. Not only is this a good eye opener that bonds have delivered better returns, but they have also done so with much lower volatility.”

The article notes that the coronavirus pandemic has “turned life upside down in the U.S.”, in stark contrast to a matter of months ago when economic growth was expected to bump up and analysts projected that the long-standing bull market had more room to run. A flight to safety by investors during times like these, it adds, is typical as they “try to minimize their risk.”