While the below chart cherry picks one of the best performing fixed income sectors, it is still pretty amazing.
Bonds (defined in this example as the Barclays Capital Long Government / Credit index) have now outperformed stocks (defined as the S&P 500 index) going back to November 1980 (10.7% annualized vs. 10.4% annualized) and has more than doubled the performance of stocks over the past 15 years (239% vs. 108%). Note the chart below is total returns including reinvestment coupon payments and dividends.
Is this likely to continue?
Unless capitalism as we know it ends, the answer is a simple 'no' over the next 15 or 32 (or even 3-5) years. The government / credit index shown above yielded a whopping 13.18% as of November 1980 and the next 32 years were the great bond run that has resulted in the current paltry yield of 3.89% (just 7 bps off its all-time low).
Source: Barclays Capital / S&P