Days are getting longer and equities are getting stronger, but U.S. bonds are costing you returns. If we look at the 10-year rolling annualized returns for 15+-year bonds in the USA, we see that they have given you negative returns. So that was not a good investment with hindsight. Bonds are generally used to lower the risk of a portfolio, but they have done the opposite. Currently the 10-year bond yield in the U.S. is trading just below the psychologically critical level of 5%. This is the highest level since 2023. The high oil price is causing inflation, which causes higher interest rates, resulting in the higher bond yields. If this trend should reverse, the current yield on bonds would be a very good entry point as an investment.
We can also look at the returns for the various asset classes over the last 16 years and we can see that everything is positive for the year to date except bonds and bitcoin. How ironic that one of the lower-risk asset classes is fishing in the same pond as one of the highest-risk ones, and that brings us to the difference between a bubble and a boom. Some people still do not understand that you will never pay a cheap price for an outstanding business, and that if you hold out for the price of the outstanding asset to come down so that you can buy in, you might stay on the sidelines forever. To illustrate this point in the simplest way possible, look at this illustration.
It must be said that this war with Iran is getting very repetitive. Every time there is a flicker of hope, the price of oil drops and asset prices go higher. Then they start shooting again and things reverse. You have to believe that this will not be a forever war and that when things get sorted out, equities will jump, oil will drop and bonds will perform.