Toward the end of 2013, BlackRock's chief investment strategist for fixed income, Jeffrey Rosenberg, predicted that stocks would beat bonds in 2014. Now he says stocks are set to outperform bonds once more—and that poor bond performance will actually make that relatively easy.
From 2014 to 2015, "I think the big difference is really what kind of direction of returns we are talking about in the bond side," Rosenberg (who bears no relation to the writer) said Thursday on CNBC's "Futures Now." "Stocks can beat bonds, and it's a heck of a lot easier when bonds are not delivering the kind of returns they did in 2014."
By reasonable measures, equities indeed did beat fixed income in 2014, as Rosenberg had predicted. However, he did not predict that bonds would perform as well as they did over the course of the year, as rates fell despite widespread expectations to the contrary.
"No one expected these kind of returns out of the long end, ourselves included, even though that's where we favored in terms of a relative value. We didn't think you'd have double-digit returns in the long end," he admitted.
In the year ahead, Rosenberg doesn't expect to see similar action in the bond market.
"On the bond side, you're going to be hard-pressed to repeat those kind of bond returns," he said. "That's going to make it a lower hurdle for stocks, relative to bonds, to outperform in 2015."
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