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Gluskin Sheff & Associates Chief Economist David Rosenberg on why investors should consider bonds for their portfolio.
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We -- another up day for stocks making a third day of gains but we've got someone who says people need to be paying more attention to bonds.
Joining us now is David Rosenberg of the Washington -- chief economist and strategist good to see again David thanks for coming -- -- the conventional wisdom as you well know.
Is that these rates are so low right now started by what the Federal Reserve does that.
That there's no money to be made in fixed income at all to which you would say.
-- -- I would say firstly if you're talking -- -- treasuries.
You're certainly not buying them for the yields right now you really buying if you buying any part of the treasury -- -- in the long end.
More for the capital gains potential of -- yields manage to grind lower then necessary -- buying it for the coupon but what I'm talking about.
In our corporate bonds and I -- that we focus almost exclusively on equities.
But there -- another part of the capital structure.
And a part of the capital structure that is a legal obligation for companies to pay.
A contractual obligation I should say which are our bonds you know companies can issue equity to raise capital -- also issue bonds.
And so people it's -- talking about well little you know.
Look how low interest rates are well you go to for example the high yield market and on average yields the -- -- 7%.
No that's sounds pretty low because -- -- times ten or twenty years ago words these bonds would be ten or 12%.
In -- -- in an arrow where risk free rates are close to zero.
7%.
In the high yield market I think -- herbs are very attractive actually especially when you benchmark it against.
The strong shape the corporate balance sheets are in right now.
David one might challenge you -- say the stock market's doing quite well all of the Dow back above thirteen thousand the S&P back about 14100 it's on quite a run here.
US -- is so much are you saying -- this stock market rallies over.
Well I'm not -- the stock market rallies necessarily over I think were.
I called the -- say in the fat past 52 weeks you've been as low as 11100 we've been as high as 14100 and change.
I guess that an investor you have to read a position where they wanna -- the market at the highs with the -- -- 1516.
Her where do you wanna buy it towards the lower part of the -- when the -- is at thirty.
But I would say that the stock market that best as fully priced right now my opinion now there -- segments of the market that I like ten.
I've been a big proponent of income equity.
And it's so far is you know who couple the sectors that have been leaders in the past several weeks I'm talking about say.
Telecom service says that health care consumer Staples.
Been a pretty good areas to be up until the past couple of days we've had this.
-- beta trade on but that's only a couple of days that hasn't proven itself to be in a pattern.
But dividend growth dividend yield in my opinion is a slice of the stock market.
That we've been favoring for our clients.
Our corporate bonds again in an era where we have more deflation inflation in an era where.
The median -- -- the boomers 551 -- 56 so there.
Age profile from -- investing is going until -- risk tolerance and more in the way of income orientation.
I think corporate bonds are perfectly appropriate.
It's seven this thought that 7% is is that is that -- to be yield.
It's really benchmark against what the default rate is going to be.
And my sense is that you know here we are with the US economy hitting stall speed.
And the corporate the fall rate is fairly more than two and a half percent which is about two percentage points below -- historical norm.
-- -- little credit we -- literally run out of time but I just have to ask you one question quickly what do you think about the economy specifically.
What the Federal Reserve is doing about it right now we we heard from the Boston fed officials saying.
We should print money -- till the cows come home what do you think of that advice.
Well I mean I that's hyperbole.
I don't think the Fed is going to probably have to provide more stimulus side they're keeping their powder dry to -- a solid.
They're standing on guard but.
I think economy notwithstanding the the nonfarm payroll headline on Friday that the.
-- David Rosenberg thank you so much for joining us Christians -- chief economist and strategist thank you very much --
