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Get Out of Bonds, Stay with Stocks: Strategist

The run in treasurys is over and it’s now time for investors to sell the 10-year and 30-year bonds, said CNBC’s Mad Money host Jim Cramer. Should investors continue to build their position in bonds or should they look toward stocks instead? Barry James, president of James Advantage Funds and Stephen Wood, chief market strategist at Russell Investments shared their strategies.

Get out of treasury bonds and stay with stocks, Wood recommended CNBC.

“You’ve seen this fear trade move into safe haven,” said Wood. “Post-Lehman, you really saw anything that had remote risk characteristics—even fixed income had exposure into credit space—sold off dramatically. A lot of those safe haven plays have been looking toppy for us for a long time. I don’t see any reason to change the perspective.”

Wood added that treasurys are “predominantly a risk play.”

But sounding a somewhat different note, James said investors ought to get into TIPS (Treasury Inflation-Protected Securities).

“TIPS are very cheap,” he said. “Even though they’ve done much better than the regular treasurys this year, we still think it’s a very good time to buy TIPS.”

According to previous studies, James said the markets are due for a period of consolidation or a pullback “in some case, 30 to 40 percent.”

“We see that the risk today in stocks is pretty high and risk in bonds is pretty low,” he said.

Wood Likes:

S&P Technology

S&P Energy

S&P Consumer Discretionary

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Disclosure:

No immediate information was available for James or Wood.

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