While they haven’t been a buffer in the first half of 2022, the returns enjoyed by bondholders in July have been significant.
members have had to deal with periods of extreme volatility since January and, with June 30 top-up contributions and dividends in the bank account, are deciding what to do next with their excess cash.
Bond yields are providing a yield to maturity of about 4 per cent, and the Barclays Global Aggregate Bond Index delivered a 2.49 per cent return for July – the sixth-highest monthly return since 1990. If the market is right about future cash rate movements, a defensive investment providing a 4 per cent return a year sounds like a good place to invest.Given the higher risk that investors face when investing in growth asset classes , they expect to be compensated fairly for taking on that risk.
So, what return can be expected from equities? There is no similar relationship between prices and yields when it comes to equities, so forecasting is even more inherently unreliable.History shows that roughly one in four years is negative and three out of four years are positive. What is also known is that the positive rebound typically seen after negative periods, when looking at the US market, means prices recover rapidly.
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