Here’s a grim forecast to consider: It may be 2021 before you make any money on investment-grade bonds again.
Bloomberg News reports Morgan Stanley Wealth Management’s Jonathan Mackay predicts the securities will post annual returns of between 1 percent and 2 percent for the next seven years -- which means you’ll lose money after accounting for inflation. That’s a big shift considering the debt gained 8.7 percent annually on average in the 30 years through 2012.
Investors should 'have a lower average allocation to bonds than you would have in the previous cycle because they just don’t provide the income and return,' said Mackay, senior market strategist at Morgan Stanley’s $2 trillion wealth management unit. While central-bank stimulus is supporting bond values, 'the collateral damage is going to be lower portfolio returns.'
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