Bad Quarter

[Eagle43]

http://www.dfw.com/mld/dfw/business/11353519.htm

You knew this of course, but here's a measure of confirmation:

Stocks and bonds both lose money in 1st quarter

By Paul J. Lim

The New York Times

It's why investors are taught to diversify: When one asset class falls, others are expected to rise, thereby safeguarding portfolios from across-the-board losses. But in the first three months of 2005, stock and bond funds lost money in lock step for the first quarter in eight years.

For stock funds, the quarter was the worst period of performance in two years. Yet bond funds offered little portfolio protection, as they lost money for only the second quarter since the Internet bubble burst in 2000.

"Nothing worked," said Joseph Quinlan, chief market strategist at Bank of America's Investment Strategies Group, noting that stock and bond investors feared rising inflation, interest rates and oil prices.

cut for brevity...and it goes on...

The big blow for diversified investors was that bond funds also fared poorly during this stretch, as long-term interest rates finally began to respond to short-term rate increases by the Federal Reserve Board that started last summer.

The yield on 10-year Treasury notes, for instance, was 4.5 percent at the end of the quarter, up from 4.22 percent at the start of the year. Bond yields and prices move in opposite directions, so the average taxable fixed-income portfolio slipped 0.7 percent as prices slumped on older, lower-yielding bonds.

A risky segment of the fixed-income universe fared among the worst: High-yield bond funds lost 1.5 percent on average. Emerging-market bond funds fell 1.1 percent.

One of the few bright spots among bond funds were so-called bank loan funds, a niche category of portfolios that invest in floating-rate debt and therefore perform better in times of rising interest rates. The average bank loan fund was up 1.2 percent in the quarter.

Quinlan predicted "continued rough sledding" for investors in coming months, especially because there is no consensus on a good place for them to put their money.

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what to do, what to do. Nothing, I expect ...

[Martha]

This is why we continue to sit on so much cash. No place to go.

[Craig]

Well, real estate continued to climb, and commodities still seem to be rising ... www.rogersrawmaterials.com/page2.html

[soupcxan]

If you were holding RWR or VNQ, I don't think you'd agree that Real Estate was up in 1Q'05.

[Spanky]

A bad quarter may indicate more disappointing quarters to come because of the upward pressures on interest rates, concern of inflation and low stock yields.

It may not be a bad idea to shift more money into short-term investments and precious metal funds.

[unclemick]

I shall continue to watch the market daily - and do nothing. By football season - being one year older may adjust stock/bond ratio based on my age and slog on.

Sports and stocks, stocks and sports - in ER pretty much a spectator - unless I take up golf or fishing or

Still looking at kayaks AND have a little putz money on the side for stocks.

I think in terms of Bad quarter of a Century rather than 1 year. Smooths things out a bit.

[ak4195]

unclemick,go long on the kayak,or sit-a-pon.dont be a fool,take lessons,enjoy.Way better than any market action,certainly better than watching any tv-sport.the pursuit or diversion of $ gains is typical,but it pales in comparison to adventure outside the computer room.