Over the long term, which I define as 5 years, market returns on cash and Treasuries have been underperforming assets compared to equities. Nonetheless, rising interest rates have hurt stock market returns over the past 3 months because virtually free Treasuries have become reasonable alternatives, even though the economy still has momentum, inflation has receded and earnings have rebounded. Thus it’s imperative for investors to understand why bond prices have been under so much downward pressure.
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By Hubert Marleau