Thought Leadership

Market Review and Outlook 4th Quarter 2009

January 29, 2010

The third quarter saw a sharp turnaround in the domestic bond market, as all sectors and all maturity ranges rallied. The panic of late 2008 continued to subside, and bond market returns correlated directly with credit and duration risk. Treasuries turned in pedestrian gains, but remain mostly down year to date. Municipals and corporates had another very strong quarter, with long-dated bonds producing double-digit returns. The high yield market was up almost 15%, and is now up almost 50% on the year. Stocks told a similar story. In short, investors rushed to purchase securities that they sold indiscriminately late last year. Investors who are desperately trying to rebuild savings quickly realized that the zero-percent money market rate engineered by the Federal Reserve was not the ideal vehicle. Flows into stock and bond funds have increased substantially throughout the year.