[TSP_Strategy] Fixed Income Performance

 

Fixed Income Sector Performance (Total Return as of 6/30/18)

Chart of the Week for July 27, 2018 - August 2, 2018

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 1 year periods ended June 30, 2018 ("current year") and June 30, 2017 ("prior year"). Positive returns occurred in six of the 11 fixed income sectors for the current year. In contrast, five of the 11 sectors produced positive returns in the prior year.

Sector returns were mixed in the current period as U.S. rates rose across all maturities after three increases in the Federal Funds target rate range during the current year. High Yield (2.62%) and Municipal (1.56%) were the best performing sectors shown in the current year as higher inflation expectations combined wtih the increasing interest rates impacted returns in many sectors. Short-Term outperformed Long-Term in both the Government and Corporate sectors. Global returns were positive (1.36%), while Emerging Markets returns were negative (-1.04%). Over the current year, the European Central Bank announced that it would reduce the amount of its stimulus program, but would extend the program through at least September 2018. Emerging Markets posted positive returns through late-2017, but rising U.S. interest rates as well as a stronger U.S. dollar diminished returns in the first two quarters of 2018.

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.

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Posted by: sarah_oz@yahoo.com

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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.

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