Charts of the Week
Fixed Income Sector Performance (Total Return as of 12/31/2018)
Chart of the Week for January 25, 2019 - January 31, 2019
The fixed income market includes many different types of securities, and their comparative performance can vary substantially. The chart above compares the performance of eleven major fixed income sectors for the one year periods ended December 31, 2018 ("current year") and December 31, 2017 ("prior year"). Five sectors shown posted positive returns in the current year, compared to all 11 sectors posting positive returns in the prior year.
U.S. returns were generally lower in the current year compared to the prior year as the Federal Reserve Board (Fed) raised the target interest rate range four times, and short-term rates rose more than intermediate/long-term rates. Short-Term outperformed Long-Term in both the Government and Corporate sectors. U.S. Long-Term Corporate (-7.24%) and U.S. Investment Grade Corporate (-2.51%) were the two worst performing sectors shown for the current year, as spreads in the corporate bond sector generally widened throughout the current period and interest rates rose.
Global (-1.20%) and Emerging Markets (-2.46%) posted negative returns impacted by a stronger U.S. dollar, concerns about central bank monetary policies, and political events including Brexit in the UK and turmoil in Turkey.
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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