Trend reversals take time with long term trends taking a long time to reverse. Throughout the multi-decade stock and bond bull markets we were used to trend reversals. By the time a downward trend was recognized, the odds were the correction was nearing its end and prices began to rise again. You might know this as buying the dips. It worked well for both stocks and bonds following the corrections of 2000, 2008 and 2020. But bonds failed to continue their bull ways while stocks went on to set new highs since then.

Bonds reversed trend in March 2020 almost five years to the day. We have entered a bond bear market, and you know it largely because I remind you every so often. Investors bought bonds on the dip in 2020, including you. Other investors invest in the bond market. Here at The Select Approach^TM, we rely on individual bonds to perform differently from the market.

Rather than selling one’s bonds in 2020 investors continued to buy because they were accustomed to buying dips. Even when the bond market failed to reach new highs in price, investors seemed pleased to buy cheaper bonds at yields much higher than in 2020. Buy more in a bear market? That is the power of Wall Street. That is the power of optimism. That is the power of not knowing the power of a bear market.

Of course, it may also be that investors do not really know how bonds work. Last month I discussed how individuals now own about seventy percent or $3 trillion of the $4.2 trillion municipal market. In a February 12^th Bloomberg article, author Martin Z. Braun looked at the returns (after fees) of open-end municipal bond mutual funds compared to customized portfolios known as Separately Managed Accounts (SMAs). Long national municipal open-ended mutual funds delivered 2.25%, -1.01%, 0.83% and 2.21% for one year, three-year, five-year and ten-year respectively. Looking at the performance of long national municipal separate managed accounts (SMAs), those clocked in with 0.58%, -1.35%, 0.47% and 2.13% for the same respective periods.