The stock market has been bouncing around like mad lately. We’ve seen a hundred point swing (at least) in five of the last eight trading days. Bonds may not only offer an explanation to this movement, but also present an intriguing investment opportunity for savvy market watchers. According to the New York Times, “stock investors often take their cues from the fixed-income market anyway, because bond investors have a better reputation for accurately forecasting the economy.” Bond investors began the year by expecting the economy to tank as a result of all the mortgage defaults. The common thinking was that much of the recent U.S. economic boom was a result of the strong housing market. As the housing market went south, conventional wisdom suggested that the overall economy would follow suit. But retail sales and other sectors have compensated, and the economy has fared better than most anyone predicted. Without an impending interest rate cut, buying bonds now rather than later doesn’t make a whole lot of fiscal sense.
