Given the Federal Reserve’s signal of prolonged near-zero interest rates as well as the higher premiums investors are paying for credit, the Bloomberg Barclays Aggregate Bond Index has dropped to a mind blowing 1% yield-to-worst. Where else can investors go for yield? 

The expectation that the Federal Funds rate will remain near zero for the foreseeable future continues to drive investment grade bond yields lower, especially when compared to junk bond yields which do not carry as much interest rate risk. 

Over the past 5 years, the drawdowns of the S&P 500 Index following  a new  all-time high appear to be getting larger and larger, raising the question if this trend will continue given the most recent peak. While the past may not repeat, we cannot ignore the possibility.