There are risks to playing it safe. That’s the overarching conclusion of a seven-year economic and financial market forecast from Wilmington Trust Investment Advisors, the newly named investment advisory and asset management arm of M&T Bank Corporation.
The firm gives investment-grade bonds and other financial assets often described as safe an unambiguous thumbs-down. According to its seven-year projection, investment-grade bonds, both taxable and tax-exempt, are expected to earn annualized total returns of 2% over the 2012 – 2018 time period, “far below what investors have earned on these bonds in recent decades,” the firm says in a statement. Moreover, with a projected annualized inflation rate of 2.3%, “investment-grade bonds are expected to lose purchasing power over the seven-year horizon,” according to the firm.
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