Given recent investor behavior, we’ve had concerns about bonds and bond funds. Investors have been heavy buyers of this category for months and months. It’s led investors to miss most of the run in the stock market over the past year, and in past instances of heavy buying in one fund category, retail investors have not exactly covered themselves in glory.
It doesn’t make me feel any better that some of the fixed income baskets in our Global Macro strategy are currently among the weakest asset classes. Now this article from Morningstar points out that many bond funds are using derivatives once again. The last go-round didn’t work out very well either.
scary!