There is growing concern that the recent US-China trade tensions, which have adversely affected both consumers and producers in both countries, will continue to plague the markets for some time.
With increasing trade war jitters, Wall Street is likely to record losses for May 2019 for the first time in 7 years. The three major stock market indices, the Dow Jones Industrial Average, S&P 500, and Nasdaq have all lost as much as 4% this month alone, and could continue this trend. If the losses persist, this would signify the first May since 2012 where any other benchmarks declined.
As a result, investors have sought potential safe havens such as bonds, gold, and even Bitcoin, as a way to mitigate the damage caused to the stock market. On a one year basis, in fact, bonds have outperformed stocks, and are looking to continue their bullishness in at least the near term.
Mike Santoli on CNBC had this to say, “Today just extending that bullish move in bonds, obviously lower in yields. And obviously it has been the story for about a year. And we are neck and neck here if you look at just the price return for some big stock and bond ETFs.”
“On a one year basis, the S&P still holds a slight advantage [over bonds]. However, it you are talking stocks versus bonds, you have to look at total return, which includes interest and dividend payments, and on this basis, for the AGG, you have 6% on a one year basis, because of that income, the LQD, +7.8%, and you have about +6% on the S&P. So there you go: bonds have beaten stocks on a total return basis, on a one year basis, and by the way, with a much smoother ride,” Santoli explained.
Santoli also noted that bonds may be assisting investors by diversifying their portfolios from risk, effectively taking pressure off of any losses incurred by the stock market, or ETFs that follow the overall market.
“Bonds are doing there job as a stabilizer of portfolios…bonds have been the haven here, and the S&P has suffered a bit,” said Santoli. But he added, “It doesn’t mean it’s forward going, it doesn’t mean this is gonna stay.”
ETF Spotlight: Here’s how bonds are moving compared to stocks from CNBC.