While Wall Street talks of recession, bond investors make a killing

While Wall Street talks of recession, bond investors make a killing



For stock investors, the trade war has been nothing but trouble. For bond investors, it’s been a dream.

Unable to stomach turbulence driven by the escalating conflict between China and the United States, and leery of a darkening outlook for the economy, investors have been pulling money out of the stock market and buying bonds, the traditional place to park cash during times of uncertainty.

The rush has turned parts of the ordinarily boring bond market into a better bet than stocks. By some measures, bond investors are having their best year since 2002.

The S&P 500 has been on a jagged path lately as bad news on the global economy, or sudden threats and escalations by President Trump or the Chinese government, have unsettled investors. The upshot of these swings is that, even with a decent gain this year, the stock bench mark is roughly unchanged from where it was in early 2018.

“For a lot of clients, they feel like they’ve just been bouncing up and down, and stocks are not going much of anywhere,” said Michael Ball, president of Weatherstone Capital Management, an asset manager based in Denver. “That gets people on edge.”

For investors weary of such volatility, the pull of bonds has proved irresistible. Bond prices do not fluctuate as much as stocks, and the returns they offer are typically more certain than those of many other investments. On top of the interest payments companies are obligated to make, the price of the bond itself can rise — as they have this year — generating an investment gain for bondholders.

So, as investors sold almost $70 billion of stock investments like mutual funds and exchange-traded funds in the year through July, according to data from the tracking firm EPFR, nearly $260 billion of cash flooded into vehicles that invest in the U.S. bond market. Interest rates in...

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