Why the Bond Market Could Be in for a Bruising


Generals are always preparing to fight the last war, the old saw goes. Likewise, investors often try to avoid the last bubble -- leading to similarly dismal results.

Following a disastrous lost decade for the stock market -- during which stocks delivered their worst performance ever along with stomach-churning volatility -- investors bolted for the safer bond market instead. Inflows into bond funds reached record levels as high-profile bond managers like Bill Gross of Pimco, the world's largest bond fund, called for an era of a "new normal" where growth would remain lackluster for the foreseeable future.