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October 15, 2012

Common Stocks Remain Better Bet for Long-term Investors

The S&P 500 Stock Index has gained 16.5%, including dividends, so far this year, and the Barclays Intermediate U.S. Treasury Bond Index has increased modestly, by 1.7%.  

The equity markets rose in the third quarter, more than regaining the decline that we saw in the second quarter.  This current rally, which started in the first half of 2009, has continued onward in spite of concerns over global economic growth, the U.S. budget deficit and the upcoming elections.  It seems as though the market has been climbing a “wall of worry”, driven by increasing corporate earnings and cash flows.  Also, with interest rates on bonds at very low levels, common stocks appear to remain the better bet for long-term investors.  Of course, equities can be volatile, and high-quality fixed income securities remain an important part of a balanced portfolio, providing safety, stability and some income.

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