here’s what’s going to happen ahead where you get the insight you need to better navigate these difficult times,
Individual Investors should avoid bonds if you have them in your portfolio to either guarantee out or make sure the maturity is not more than three years
Now some institutional Investors such as insurance companies have to buy bonds for regulatory purposes but not individuals because the huge bull market in bonds that started in the summer of 1982 had ended tread.
water is the best bondholders can hope for now until recent months bonds have been a positive investment but that is changing interest rates on treasury have gone up from where they are in 2020
It is a harbinger of troubles to come but since interest rates are still so low by historical standards Many Investors have achieved yield by buying bonds from companies that are less than stellar,
The yield obtained from this paper however is too low. n consider the risks they take when the economy slows down next year high sugar of all government spending runs out many of the faltering companies will falter and the bonds they issue will default because those companies restructure or are liquidated
Even the returns Investors get on bonds issued by the federal government are depressing given the possibility that we will experience more inflation thanks to the possibility of greater spending by uncle Sam.
We’ve never seen anything like this the prospect of spending and increasing national debt during peacetime. In the end, even the mighty feeders won’t be able to keep interest rates down.
The reality is that there will be meaningful interest rate increases by definition of lower bond prices and losses for Investors who hold them back of course if the Biden administration does not succeed in its plans for a massive tax hike.
If congress sharply reduces white house spending proposals and if federal reserves don’t fail to increase its printing out of thin air then we’ll avoid a worst case scenario but that’s a lot if that’s why Investors would do well by not buying today’s bonds at the best treasury prices. and blue chip corporate bonds will be flat and other corporate bonds not to mention many mortgages will be a bad investment because the difference between their interest rates and the high-quality issuer is still too narrow to justify the risk of recurring if you want to buy or hold the bond.
to those that mature in three years or less you will not get much of a result but you will be much less likely to suffer painful losses.