Fixed Income Sector Performance (Total Return as of 3/31/18)
Chart of the Week for April 27, 2018 - May 3, 2018
The fixed income market includes many different types of securities, and their performance can vary substantially among these types. The chart above compares the performance of 11 major fixed income sectors for the one-year periods ended March 31, 2018 ("current year"-dark blue bars above) and March 31, 2017 ("prior year"-light blue bars above). All 11 fixed income sectors produced positive returns for the current year while eight of the 11 sectors rose in the prior year.
The Federal Open Market Committee ("FOMC") of the U.S. Federal Reserve increased the target rate range for the federal funds rate three times during the current year, and U.S. interest rates were higher across all maturities. Global led all sectors in current year performance (6.97%), rebounding from its negative return of the prior year (-1.90%), helped by continuing central bank stimulus measures in Europe and strong growth in Japan. Emerging Markets also posted positive returns (3.18%) as strong demand for bonds and improving economies buoyed those markets. For U.S sectors, Long-Term outperformed Short-Term, as short-term yields rose more than long-term yields. Current year performance in all U.S. sectors was negatively impacted in the first quarter of 2018 as interest rates increased on expectations of higher inflation and even higher potential future interest rates.
Performance fluctuates over time and returns depend in part on the market environment, which 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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