Bond Market Going Bust?

By Varney and Co

Uncertainty in stocks has investors moving large amounts of cash over to the bond market. According to a recent survey by the Investment Company Institute, investors withdrew more than $33 billion out of the United States’ stock markets in the first 7 months of 2010.

Continue Reading Below

Keith Fitz-Gerald of the Money Map Press joined Varney and Company to discuss why investors are flocking to bonds.

“People are really just scared; they have no place to go,” said Fitz-Gerald. “The Fed desperately wants to stand on the sidelines with its pom-poms and encourage people back into the market. I don’t think they have a prayer of getting it [confidence] back.”

Despite the recent uncertainty in the markets, Fitz-Gerald recommends investing in equities but warns that there will still be major ups and downs in the months to come.

“The question is whether you have enough guts or intestinal fortitude to wade in [to the markets]. Statistically we know that wading in on really bad days is actually the best thing you can do for your money,” explained Fitz-Gerald. “You may have to hold your nose and wade in. For example, right now with bond markets doing what they are doing and yields so impossibly low, you could take a good healthy look at dividend stocks and get three times what the treasury is paying.”

With Treasury yields near record lows, Fitz-Gerald explains that while stock prices may be wildly fluctuating, dividend payments in big name stocks could offset any risk.

Continue Reading Below

“If you are investing in high yield dividends and those dividends stay solid, particularly if they are backed by international growth, you are, in fact, ahead of the game,” said Fitz-Gerald.