Stocks Vs. Bonds—Another Look

One very simple way of looking at the stock market’s valuation is to compare it with how well long-term bonds have been doing. Over the long haul, stocks have outperformed bonds by a bit but that fact has been thrown into disarray this decade. Since the market peaked in March 2000, bonds have pummeled stocks. In fact, bonds have beaten stocks so badly that they’ve erased the entire lead accumulated over the past 40 years.
Here’s the fact that surprised me. While stocks have rallied since March, the rally when compared with bonds was dramatic but short. Stocks only beat bonds from March 5 to May 8 (I’m using VFINX for my stock proxy and VWESX for my long-term corporate bond proxy). Since May 8, bonds have slightly beaten stocks plus they’re far less volatile.

Posted by Eddy Elfenbein on October 7th, 2009 at 1:58 pm

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