Stocks aren't Bonds; Bonds aren't Stocks
Well, yeah. Thanks for stating the obvious, Rob.
The point is that bonds are getting pounded for a very specific reason: inflation has remained persistently high and the Fed is dragging its feet about fixing it. While the current bout of inflation is complicated because of Covid, don't forget the Federal Reserve has been trying to increase inflation since 2009. They are a major factor in today's high inflation and refuse to move aggressively to rectify it.
But why are stocks hanging in there while bonds take a beating? Simple, the economy is still growing and the Fed is dragging their feet on inflation. When interest rates get high enough to change borrowing behavior in housing and business, then stocks will care. There are some early signs this is happening in housing, which may be a harbinger for the other cyclical parts of the economy.
In the meantime, as I like to tell our bullish clients, the market is giving you a graceful opportunity to de-risk your portfolio. Are you?
Call us if you want to discuss your situation.
Robert Lloyd, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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