2019 was a very interesting year for investors, as both stocks and bonds turned out to be good investments. Declining interest rates helped fuel the bond market higher, as the Federal Reserve and Bank of Canada cut or held rates last year, a marked change from previous hiking cycles.
Stocks continued to climb in part because of the same cuts- investors seeking yield were finding they needed to take on excess risk in bond markets, as yields were depressed due to Central Banking activities.
Stocks have continued their torrid pace last year, and with 2019 officially ending without a bear market, we’ve now entered territory which is unheard of - a bull market more than a decade old.
Many analysts do not see a reason to worry in 2020 and suggest central banks are likely to keep the liquidity taps open for the foreseeable future, to keep the party going. It is truly impossible to time financial markets, and with more central bank intervention than ever before, questions like when we will see the next recession continue to abound.
Bonds did well in 2019, with bond prices bolstered by ever decreasing interest rates. For those banking on a recession, and a likely return to zero interest rate policy (or maybe even negative interest rate policy), bonds look like potentially a good place to be in the near-term.
I prefer bond-like proxies in the stock market for yield right now. Many great options in the energy and utilities space offer yields in the 5% to 10% range, with added upside potential related to the capital gain opportunity.
Bottom-line, both stocks and bonds look good in 2020, though I would stick with high-dividend equities at this point in time.
Invest wisely, my friends.
