Bonds are the Better Alternative

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Sheep are timid, nervous, and easily frightened animals. For similar reasons, some fixed-income investors are described as sheepish. Investing sheep get anxious about stock market volatility and are worried when economic, financial, and geopolitical risks increase. With high stock valuations and bond yields respectable, it is time to discard TINA and listen to the bond sheep crying BAAA.

The popular Wall Street acronym of the last decade was there is no alternative (TINA). It implied there was no alternative to holding stocks since bond yields were so low. Before this year, the limited upside in bond prices and meager yields made it tough to argue against TINA.

The bond market sheep are speaking up and saying BAAA. With U.S. Treasury yields around 4% and corporate bonds yields even higher, we should consider bonds are an alternative (BAAA).

To appreciate BAAA, I share the expected returns of stocks and bonds. The analysis will help you decide if the bond sheep are on to something.