DJ Global Yield & Domestic Bonds – Growth & Inflation
April 25, 2017
The Dow Jones Global Yield Index (DJGYLDT) and the Barclays U.S. Aggregate Bond Index (Domestic Bonds) have returned 151% and 8.7%, respectively, since December 31, 2005 (Figure 1). DJGYLDT bested domestic bonds primarily because U.S. Treasury bonds and U.S. corporate bonds make up around 35% and 25-28% of the index while DJGYLDT’s allocations to domestic bonds has been 15-17%. DJGYLDT weights its portfolio to the highest yielding global bonds and stocks with 40% held in global bonds and 60% in global stocks.
Much like commodities, DJGYLDT performs best when inflation is rising or stable while the 12-month rate of change on the Consumer Price Index (CPI) remains above 2.5% and when annualized real gross domestic product (NGDP) remains above 4%. The global yield index is impacted more by the price direction of oil than it is by gold (Figure 1). Domestic bonds underperform allocations when growth strengthens and inflation rises. DJGYLDT’s five sub-indexes enabled it to best domestic bonds when these trends unfolded (Figure 2).
InFocus Highlights: (Figures 1-2 begin Jan 1, 2006, Figure 3 begins Oct 24, 2015. They end April 24, 2017.)
- DJGYLDT’s 52-week correlation to NGDP weakens as oil (WTIC) rises and strengthens as the price of gold declines (Figure 1).
- DJGYLDT’s technical trend is bullish over the next 3- to 6-months (Intermediate-Term, Figure 3).
Figure 1. Global Yield – Oil & Gold
Figure 2. DJ Global Yield and Its Sub–Indexes – Last 12 months
Figure 3. DJ Global Yield’s Intermediate–Term Price Trend – Bullish
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