Fixed Income Sector Performance (Total Return as of 6/30/16)
Chart of the Week for July 29, 2016 - August 4, 2016
The fixed income market includes many different types of securities, and performance can vary substantially among these types. The chart above compares the performance of eleven major fixed income sectors for the one year periods ended June 30, 2016 ("current year") and June 30, 2015 ("prior year"). Positive returns occurred in all eleven fixed income sectors for the current year. In contrast, eight of the eleven sectors produced positive returns in the prior year.
Long-Term Government (18.98%) and Long-Term Corporate (14.06%) were the best performing sectors in the current year, as rates generally fell on securities with maturities of greater than three years. Short-term rates generally rose though. After raising the Federal Funds target rate range in December 2015, the Federal Open Market Committee has not subsequently raised the target rate range. Global (8.87%) and Emerging Markets (7.83%) posted higher returns in the current year, as continued economic stimulus has lead to lower, and even some negative interest rates, in developed countries. Strong demand for new issue sovereign bonds has helped Emerging Markets. High Yield (1.62%) recovered from the prior year negative return as recovering oil prices helped the issuers of high yield debt in the energy sector.
Performance fluctuates over time and is hard to predict. Changes in both actual and expected interest and inflation rates can materially impact fixed income investments. Also, investors should note that even U.S. Government securities can decline in value and investing in sectors such as High Yield or Emerging Markets involve additional risk.
When making investment decisions, prudent investors should invest based on their own circumstances taking into consideration their goals, investment experience, time horizon, and risk tolerance.
Posted by: sarah_oz@yahoo.com
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