Stocks vs. bonds in 1985 and 2005

I;d like to share this interesting article: Bond market may give stocks stiff competition (Interest rates are key to safest place to put your money) By Scott Burns of the Universal Press Syndicate.

It starts with a history lesson: 1985 was a good year for investing. Many people chose bonds yielding 9-12% over stocks which were up 32.2% (for the S&P 500) because bonds are safe.

Now that bond yields are wyay down, we have to be careful:

Two things. First, valuations are likely to be reasonable in 2005 even if long-term interest rates climb to 6 percent. If interest rates remain the same, 2005 could be another good year for the U.S. stock market.

Second, the caution light is on. We need to watch interest rates very, very carefully.

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