Investment pros bullish on bonds

Not even a 50% haircut has convinced professional money managers that stocks are bound for a rebound. According to the most recent Russell Investments’ quarterly survey of professional investment managers, the money minders are far more bullish on bonds than stocks. Two-thirds of the money pros report they are more bullish on corporate bonds and 61% are more bullish on high-yield corporate (junk) bonds compared to the previous quarter. Both are records in the five years since Russell began checking manager sentiment.

As for stocks, well, the most bullish reading was for U.S. large cap equities, but the 57% bullish rating this quarter represents a 10% decline from three months ago.

Indeed, bonds have clearly moved into the spotlight. While that might not be too surprising given the bloodbath in stocks, an illuminating short piece in Barron’s features money manager Rob Arnott making the compelling long-term historical case that bonds aren’t exactly a distant second to stocks.

Before you jump on the bond wagon, or increase your fixed-income fix, make sure you check out Joe Light’s recent Money article on bonding smartly. No matter how bullish the pros may be about junk, chasing the high yields presents much risk, and that’s not exactly what you’re looking for in bonds these days, right? And think twice before piling into “risk-free” Treasuries. Yep, they are indeed safe in terms of default risk, but their super-low yields today make them less than alluring. Treasury Inflation-Protected Securities (TIPS) are a better deal.

– Carla Fried