That’s the question Steve Blumenthal, CEO Of CMG Capital Management Group, ponders in his latest Forbes article Why Bonds Are A Buy And Everybody Had It Wrong.
Not a single Wall Street analyst polled in December 2013, predicted rates lower than 2.90% by the end of 2014. Goldman Sachs’ estimate was for a 3.25% yield by year-end. Then, the yield was 2.99%. It’s at 2.40% today.
If America’s top economists have been so wrong (so far) about interest rates, what chance does the average investor have? Where can we look, if not to economists, for signals that will guide investment decisions in this dicey interest rate environment?
Steve Blumenthal has an answer – the CMG Zweig Bond Model, adapted from the model developed by the famed investor Marty Zweig. The model has been flashing a strong buy, contrary to increasing bearish sentiment around a bond bubble.
How many investors pulled out of bond funds because of the consensus of economists or other market prognosticators calling the rise or fall of interest rates? How many portfolios adjusted for shortened exposure in December 2013, expecting higher interest rates?
Who would have thought in December 2013 that bond funds would be a very advantageous place to allocate assets for 2014.
The results say it all:
- +5.64% iShares iBoxx Investment Grade Corporate Bond symbol “LQD”
- +13.60% iShares 20+ Year Treasury Bond ETF symbol “TLT”
- +21.71% Vanguard Extended Duration Treasury ETF symbol “EDV”
- +23.95% PIMCO 25+ Year Zero Coupon U.S. Treasury ETF symbol “ZROZ”:
The CMG Zweig Bond Model
The CMG Zweig Bond investment process is a strategy that makes managing risk a top priority. Note the return box highlighted in yellow in the chart. It shows the % Gain/Annum when the model is in a “buy” signal. Note the -0.29% historical return when in a “sell” signal. The model process is unchanged since the mid 1980s, is easy to follow, easy to implement, trades infrequently and may help you preserve your principal in the coming rising rate environment.