Chart Advisor: A Pure-Play in the Bond Market

By Adam Koos, CFP, CMT, CEPA

1/ Annuities

2/ Convertible Bonds

3/ Bond Market

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1/

Annuities

I was talking to my lead financial advisor at the office today (Kim), and I told her I was going to start today’s Chart Advisor report with this chart (below) and she said, “Don’t do it!”

(I’m going to catch some flak from my fellow market technicians for this one!)

Let’s start with this – I’m not a huge fan of annuities… but I published an old podcast a few years ago titled “Why Annuities Suck! …aaand When They MIGHT Actually Make Financial Sense!” If you have any interest in this old thing, click HERE.

Annuities are generally expensive, commission-ridden, over-sold investments that might make sense for some people, for some of your money… but the problem is, many of the salespeople who sell them think they’re the best investment for all people, for all of your money (and again, the problem lies in the commissions and high fees typically baked into these investments).

I know this is supposed to be about charts, but stay with me here…

In the first two decades of my career, we literally allocated fixed annuities to three clients’ portfolios. That was it.

However, since Jerome Powell started hiking rates, and for the first time in my career, some of these “crappy” investments can actually make a lot of sense for many investors.

I could write an entire article on this topic, alone, but let’s just keep thing simple and say that, these days, there are fixed, indexed annuities out there that have 5.5% rates (or better, depending on the options and “buckets” chosen), and while these things aren’t going to shoot he lights out, I want to drive home two points:

1. If you’re closing in on retirement (or already retired), who’s ever been upset with 5.5%?
2. Most of the retirement plans we run for working professionals and business owners who hire us are modeled with net-after-tax-and-fees RORs in the 3.5 – 5% range.

So, at the risk of being burned at the stake by my fellow CMTs, I hate saying it – but it’s true… there’s a place for these things in a properly allocated, risk-adjusted portfolio, built for a pre-retiree or retiree who doesn’t want the volatility of the bond market. #JustSayin’

Past performance is not indicative of future results

2/

Convertible Bonds

…which brings me to the REAL charts that people want to see. Let’s talk about bonds – you know – the “safe stuff,” right?

Truth be told, when observing the 26-week performance of 27 different bond sectors, convertible bonds are the only group ranked below money market on a relative basis that also happen to be trading above their 40-week moving average.

Since convertible bonds correlate so closely to the stock market, this shouldn’t be all that surprising – and it also means that convertibles aren’t necessarily a pure “bond” play.

Past performance is not indicative of future results

3/

Bond Market

Let’s finish up today by looking at an actual pure-play in the bond market with the top-ranked bond sector in my inventory today.

There are other bond sectors that rank in the top quartile, such as:

• World Inflation Protected Securities
• 3-7 Year Treasuries
• Domestic TIPS
• Short-Term Corporate Bonds

It’s been a choppy ocean out there in the bond market… but international corporate bonds have been leading the pack in terms of relative strength.

Below, you can see how there have been weeks when price fell below water for longer than most safety-conscious fixed income investors would be comfortable with.

The lesson here is, pay attention to rates, don’t assume bonds are always “safe,” and when considering the fixed income portion of your retirement portfolio, keep a newly open mind. We’re living in a different interest rate environment than most are accustomed to.

Past performance is not indicative of future results

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Originally posted 21st May 2025