Bianco Research: Bonds “Center of the Universe,” Investors Will Want to Stock Pick
The stock market’s recent selloff has spilled over into other asset classes. The most important asset class is bonds. Typically, bonds move far less than stocks. But they also represent more capital, and capital that investors want to preserve rather than grow.
The selloff in the bond market has pushed interest rates higher. That’s good news for bond buyers. For existing bond owners, it indicates a selloff. For now, the bond market move suggests caution across all asset classes.
Meanwhile, tariff news is leading to a volatile stock market. It’s not just one of rallies and declines, but of investors picking and choosing potential winners.
That’s in stark contrast to the past two years, when investors could simply buy the index, and benefit from rising stocks. Especially with the heavy weighting of the rallying Magnificent Seven plays. With that trend shifting, investors need to think more defensively.
That could bode well for sectors such healthcare, which has been a strong winner so far in 2025. Utilities tend to fare well in defensive markets also, and offer investors bond-like income returns.
Given that the tariff fears may resolve as quickly as they flared up, investors should think defensively now. But staying out of the stock market could mean losing out on strong potential returns.