The bond surprise that has caught investors out – and what to do about it

The start of 2014 has caught investors (both professional or private) by surprise. Investment experts and commentators were almost unanimous in decreeing the end of the bond bull market at the start of the year. But year-to-date 6 out of the 7 top performing sectors are bond/gilts (see table at the foot of this note). So what’s happened?

In this note I look at

• whether bond sceptics were wrong to call the death of bonds?
• why has index linked gilts been the top performing sector
• should investors hold onto their bond exposure?
• why the’ smart money’ (institutional investors) has been rotating from equities to bonds?
• plus where are the bond opportunities for investors?

First of all, 2013 was an excellent year for equities, the FTSE 100 alone rose 18.66%.