A pair of ugly recessions and a bullish climate for government bonds and bond-related exchange traded funds (ETFs) has helped stick a fork in the notion that stocks will always beat bonds in the long run.
Conventional wisdom has said that over the long haul, equity beats bonds. However, over the last 10, 20 and 40 years, this hasn’t exactly been the case, says Rob Arnott, founder of investment consultants Research Affiliates. The S&P 500 has actually yielded a return of -2.5%, whereas the Vanguard Long-Term Treasury Fund has gained 7.2% annualized over the same period, reports John Spence for Market Watch.
Granted, the burst of the dot-com bubble and the financial crisis of 2008 played pivotal roles in these numbers.
Arnott’s statements have sparked a duel between him and Jeremy Siegel, a finance professor at the Wharton School. Siegel says government bonds are not where investors should want to be right now. However, corporate bonds – both high-yield and investment-grade – are experiencing a resurgence.