The stock markets opened sharply lower again today. Steve McDonald says bonds are a much safer and more profitable alternative right now. Investors should stick to short-term bonds to maintain a flexible portfolio and limit market risk.
US economic data releases make grim reading these days. Jobless claims hit their highest level for seven years in September. US factory orders tumbled 4% in August.
MarketWatch says recent data “make it all but certain that the academic economists will eventually declare that the economy is in a recession.”
Charles Delvalle says we are in a deflationary cycle that will only get worse as more credit is sucked out of the financial system. He recommends high-yielding corporate bonds for investors looking to avoid the stock market gloom.
It has been a wild ride for investors over the last couple of days. All eyes are on stocks and commodities as they get whacked by the meltdown on Wall Street and the government’s bungled attempts to ‘fix’ the situation. The investment-grade corporate bond market, meanwhile, is showing some great value, says Eric Roseman.
Losses of $500-$600 billion are enough to make anyone shudder. But Charles Delvalle says these estimates don’t come close to measuring the eventual fallout of the current credit crisis.
Credit losses could reach $2 trillion. That translates to $10 trillion of liquidity wiped out, using a very conservative estimate of leveraging (Lehman Bros (NYSE:LEH) had a leverage ratio of over 30 last year).
Charles says we could be entering the biggest deflationary period since the Great Depression. The best protection lies in top grade corporate bonds.
If you’re nervous about investing in today’s volatile market, Eric Roseman says asking yourself three fundamental questions can help set you on the right track. 1) Are you looking for a dollar or a euro-based portfolio? 2) What’s your growth horizon and risk objectives? 3) What is your asset allocation?
Editor’s Note: DailyWealth’s Steve Sjuggerud thinks there is an extraordinary opportunity for investors in the bond market.
Last week I tried to open a savings account for my son. The credit union offered me a 1% interest rate… If I had given my money to the credit union, I would have guaranteed my son a 5% annual loss.
While the market rallied for the last few years, one strange thing was happening. The spread between yields on corporate bonds and government bonds was virtually non-existent. This means investors weren’t paid much for the risk they took on for getting into corporate bonds.
