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Investors Head to U.S. Treasuries

The annual May Europanic is in full swing and accordingly, investors are piling into U.S. treasuries. As of last week investors have pulled $10 billion out of U.S. stock funds and put $12.1 billion into U.S. treasuries, a perceived safe haven in times of crisis. But there are a couple things to note. Treasuries are yielding less than 2% while inflation is running at about 2.3% - so investors are losing money over time. Interest rates are also at historic lows. If the Euro crisis eases and U.S. continues to grow we will see interest rates “reflate” to more normal levels. Finally, there are plenty of attractive opportunities in other bond asset classes. Treasuries are good, but not the end all, be all. We advocate broad global diversification. Please see page 3 of the Global Perspectives book for a sample global allocation and its historic returns.