Now is the hour of the crystal ball, as you set about positioning your portfolio for the coming year and plan any year-end tax selling. Last year at this time I cautioned against following the sentiment that ruinous interest rates lie ahead. I advised you to stay the course. Well, thus far this year using the ten-year Treasury as a benchmark you haven't done badly. It started out the year at a 4% yield, hit 4.5% by summer and has eased back to 4%. I often recommend junkier bonds; this category (as measured by a Merrill Lynch high yield index) had a 7.8% total return. For 2005 I again expect good news for the bond market. Rates will stay moderate, or even decline some. Inflationary pressures are minimized in a world where all nations compete. The low-cost producer brings everyone down to his level, making deflation as much a concern as inflation.
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