Bail on Bonds: The Great Rotation into Equities
Until recently, the acute search for yield had driven more and more money into fixed income. However, expectations around fiscal stimulus owing to the U.S. election drove up growth and inflation expectations which seem to have resulted in a Great Rotation from bonds to equities.

 
  • U.S. interest rates reached record lows mid-year and investors’ search for yield was so strong that bond flows outpaced equity flows each week on a trailing 4-week basis.

  • However, the week after the presidential election, over $16 billion flowed into equities and nearly $9 billion flowed out of bonds.

  • Equities may outperform bonds going forward for several reasons: interest rates are expected to climb, equities are reasonably valued, and solid earnings growth has resumed.

  • Has the multi-decade bull market in bonds come to an end?

The views expressed are the views of Fred Alger Management, Inc. as of November 2016.​​ These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

Risk Disclosures: Investing in the stock market involves gains and losses and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks, as the prices of growth stocks tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political and economic development.

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