The bond market is anticipating a rise in interest rates. Jeffrey Gundlach of DoubleLine Capital believes now is the time to position your portfolio defensively to prepare for higher rates. One reason for the rate change may be the continuing economic recovery. In 2015, household income in the U.S. posted its highest increase since 1968. Lucia Mutikani and Susan Heavey report on the numbers for Reuters. Senior Vanguard economist Roger Aliaga-Díaz says the U.S. economy has been meeting expectations for growth of 2%, despite global economic fragility. The question investors may ask is, “Can it be sustained?” Aliaga-Díaz offers analysis and an outlook for the volatile investment environment.

Gundlach: A “Big, Big Moment” For The Bond Market–  The bond market is “sniffing out” an unfriendly change in the direction of interest rates, according to Jeffrey Gundlach, founder of DoubleLine Capital. Rates are going up, he said, and investors should position their portfolios defensively for a long-term secular rise in rates.  He believes, “This is a big, big moment,” and it won’t pay to “be cute” by trying to benefit from short-term price movements, since the dominant trend will be higher rates. Read more…

U.S. Household Income Posts Record Surge In 2015, Poverty Falls–  U.S. household income posted a record increase in 2015 after years of stagnation, suggesting the recovery from the Great Recession was finally lifting ordinary citizens who had been largely left behind.  The Census Bureau said on Tuesday that median household income surged 5.2 percent last year to $56,500, the highest since 2007, in large part due to solid employment gains. The jump was the biggest since record keeping began in 1968. Read more…

Vanguard: Checking In On Our Economic Outlook–  One of our key expectations has been that the U.S. economy would remain resilient despite global economic fragility.  Senior Economist Roger Aliaga-Díaz, Ph.D., and Vanguard’s Investment Strategy Group, didn’t expect it to grow at 4% as it did in the “good old days” when expansion was being fueled in part by debt-financed consumer spending.  Vanguard has been projecting 2%, which is a more sustainable, balanced growth rate, and full employment in the United States, which would result in a slowing of job growth.  Aliaga-Díaz is pleased to see both outcomes playing out in the data, as these are signs that the U.S. economy is remaining resilient. Read more…

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John R. Day, Bill Ennis, Stephanie Davidson and Matt Heller

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