More mileage in Wall St treasuries

INTERNATIONAL MARKETS: NEW YORK

This month, for the first time in two years, returns on US Treasury bonds were positive while returns on US stocks were negative - and some investors say this pattern that will continue.

US stocks slumped along with global equity markets amid concern that financial turmoil in Hong Kong and elsewhere in Asia would hurt corporate profits. Treasury bonds meantime climbed as investors flocked to the safety of US debt. Bonds also got a boost amid optimism that a slowdown would keep inflation at bay and allow the Federal Reserve to leave rates steady.

Yet many investors say the rocky times for equities are not over yet, which may mean more gains for bonds are on the horizon. "When the stock market starts to fall again, there's going to be another flight to quality," said Edgar Peters, manager at PanAgora Asset Management in Boston.

Bonds were not a bad place to be this month. A $1m (pounds 615,000) investment in 30-year Treasury bonds made on 30 September is now worth about $1,038,000. That represents a return of 3.9 per cent. By contrast, a $1m investment in the stocks comprising the Standard & Poor's 500 Index made on the same day would now be worth $967,900 - a loss of 3.21 per cent.

"There is a reverse trading pattern going on for equities and bonds and no reason that won't continue," said Lauren Best, manager at Advisers Capital Management in New York.

US stocks may see more losses in the days ahead, though the worst of the rout is over. Investors said last Monday's 7.2 per cent slide in the Dow Jones Industrial Average was an overreaction to the events overseas. South-east Asian markets, while some of the fastest-growing on the globe, do not yet account for a large portion of US exports.

What concerns these big money managers more is the trend among some investors to sell their stocks first and ask questions later. A 30 per cent rally in share prices this year has made some holders trigger-happy, they said.

"The issues in Asia won't have that big of an impact on the US economy itself, but the market needed an excuse to go down," said Vernon Winters, chief investment officer at Mellon Private Asset Management in Boston. "For so long, equities were the things to own. So something was bound to come along and disturb the market."

Mr Winters said investors did not want to find themselves behind the latest trend in prices. "What investors are saying is, `I'm going to sell now because you may be nervous about all this turmoil, and you may want to sell later. And I want to get out before you get out.'"

The Dow Jones Index ended one of its most volatile week ever down 273.33 at 7,442.08, a 3.5 per cent loss. Monday's 554-point decline, which caused the shutdown of the stock market for the first time since President Ronald Reagan was shot in 1981, was the biggest one-day point drop in history.

For the year, the 30-stock average is up 15 per cent. The Standard & Poor's 500 Index slid 27.02 points, or 2.9 per cent, to 914.62 for the week, while the Nasdaq Composite Index fell 57.31, or 3.5 per cent, to 1,593.61.

Thomas O'Neill, chief investment officer at Fleet Investment Advisors, said his money managers used the drop in prices on Monday and early Tuesday to put some cash to work. In Fleet Investments' personal accounts, the percentage of cash was cut to about 20 per cent of assets from 25 per cent. Should the market rally back to its October highs, Mr O'Neill said would not hesitate to raise cash again.

The decline in US stocks was as broad as it was deep this week. Only 76 stocks in the S&P 500 Index ended the week with a gain. Of those, 47 advanced more than 1 per cent.

Copyright: IOS & Bloomberg

News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
Review: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
Travel
travel
PROMOTED VIDEO
Arts and Entertainment
Sydney and Melbourne are locked in a row over giant milk crates
artCultural relations between Sydney and Melbourne soured by row over milk crate art instillation
Arts and Entertainment
Adèle Exarchopoulos and Léa Seydoux play teeneage lovers in the French erotic drama 'Blue Is The Warmest Colour' - The survey found four times as many women admitting to same-sex experiences than 20 years ago
filmBlue Is The Warmest Colour, Bojack Horseman and Hobbit on the way
News
Two giraffes pictured on Garsfontein Road, Centurion, South Africa.
i100
Environment
View from the Llanberis Track to the mountain lake Llyn
Du’r Arddu
environmentA large chunk of Mount Snowdon, in north Wales, is up for sale
News
Kenny Ireland, pictured in 2010.
peopleBenidorm, actor was just 68
News
i100
Arts and Entertainment
arts + ents
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Morrissey pictured in 2013
people
News
people
News
A scene from the video shows students mock rioting
newsEnd-of-year leaver's YouTube film features playground gun massacre
News
i100
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Day In a Page

Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup
Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices