Fixed Income Sector Performance (Total Return as of 9/30/16)
Chart of the Week for October 28, 2016 - November 3, 2016
The fixed income market includes many different types of securities and performance can vary substantially among them. The chart above compares the performance of 11 major fixed income sectors for the 1-year periods ended September 30, 2016 ("current year" — dark blue bars above) and September 30, 2015 ("prior year" — light blue bars above). All 11 fixed income sectors shown produced positive returns for the current year while eight of the 11 sectors produced positive returns in the prior year.
Long-Term Corporate and Emerging Markets were the best performing sectors in the current year with returns of 15.70% and 13.93%, respectively. Tepid economic growth, the U.S Federal Reserve ("Fed") not raising the target rate range of the Fed Funds Rate, and strong levels of issuance helped fixed income performance. Global fiscal stimulus, including China, helped Emerging Markets securities. Long-Term outperformed Short-Term in both Government and Corporate sectors as long-term rates fell and short-term rates rose. The largest change from negative to positive performance occurred in High Yield, which went from -3.43% in the prior year to 12.73% in the current year. The recovery in the price of oil helped issuers in that 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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