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How High Can Bond Prices Go?

June 10, 2016

Bond Prices have been going up for 35 years. This has made Interest Rates go down for 35 years. Will Bond prices ever go down, and Interest Rates ever go up?

Some say that Bond prices will go even higher, and interest rates even lower, as our economic numbers have shown some signs of slowing in our economy. Of course, no one knows for sure what will happen, but Bond prices this high does give us pause. We don’t want our clients to suffer if Interest Rates start rising at a fast clip, making Bond values start to decline at a fast clip.

Bonds are a zero sum game. In some recent time periods, Bonds have actually outperformed Stocks. This is not that uncommon, happening about one-third of the time. However, expecting Bond returns to outperform Stocks’ total return over longer periods of time is asking for disappointment. We know that over long periods of time, Stocks outperform Bonds. The proper mix between high quality Stocks and Bonds is the answer.

The proper mix between Bonds and Stocks depends in part on each individual’s Risk Number. To see your personal Risk Number and appropriate portfolio, take a free Riskalyze test here.