Treasurys are likely to continue to be viewed as safe-haven investments for a few reasons: They remain AAA-rated by two of the three primary ratings agencies, plus most investors remain convinced the U.S. will not default on its obligations. And while it's possible that the recent downgrade will result in a higher cost of financing in the longer term for the government, as far as the investor is concerned, the U.S. Treasury market should certainly remain the preeminent sovereign debt market in the world for the foreseeable future.
The Road Ahead
Predicting when markets are likely to stabilize, and when investors will see fruits of their low-valuation acquisitions, is a speculative exercise at best. Even before the downgrade, investor confidence was already on shaky ground due to slowing economic growth and stubbornly high unemployment. The market had already been sliding and the heated deficit reduction/debt ceiling debates compounded worries in general. Plainly stated: we're in a rough patch. But just because we're likely to see the market sail choppy waters for a while doesn't mean that generating positive returns is any less possible, provided investors have a well-thought out investment program as a lighthouse beacon.
Brandon Thomas is chief investment officer for Envestnet|PMC, a provider of consulting and analytical investment solutions to financial advisors and their clients.