Playing It Slow

The economy's cooling, so bonds are hot. But hold your stocks--unless you see a recession

With tech stocks limping, the dow underwater for the year and most everyone's tea leaves pointing to a slower economy, you may find yourself thinking the unthinkable: Time to buy bonds. Ugh. You wouldn't be nuts. Fixed income is a great place to hide in a slowdown, especially one that spills into recession. The last time that happened was 1990, which is also the last time that both bonds and cash outperformed stocks for a calendar year.

The numbers hint that such a scenario is taking shape again. Treasury bonds this year have returned 13.9% and cash (T bills) 3.9%, both...

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