I like to be shakin, not stirred, that's my motto. And this shakes me...
https://ca.finance.yahoo.com/video/10-treasury-yield-drop-summer-213456076.html
BRAD BERNSTEIN: We do we see the 10-year by next summer potentially down 100 basis points from here. We're recommending right now for our clients to be adding to balanced portfolios because we love the fixed income market and we like the stock market at these levels.
Ok, but that's not the way this is suppose to work? You are suppose to sell stocks and buy bonds, or sell bonds and buy stock? So where is this money coming from to buy both?
First off we need to look at why Bonds, and specifically Treasuries so cheap? They are cheap because nobody was buying them, making them a bargain. So why are arent people buying them?
2 basic reasons, 1. Stocks are more popular, and 2. You can get a good rate of return from other financial instrument's. Such as GIC's, and short term T-bills.
Currently, shorter-term Treasury yields are higher than longer-term yields, which is known as an inverted yield curve. What that means is the market is expecting rates to come down in time. But as long as they keep going up, the 10 year will drop in value. So its a waiting game.
But as the above states, we think the end is near for rate hikes, and Bonds, and longer Treasuries' will start to rise in value, they are a bargain, but wait, stocks like a drop in rates don't they? Yes, but not if we go into a Recession which is what many are predicting.
Ya, I know it makes my head hurt too. And its all because of 3 things that are hard to get our head around. Low rates for way to long, triggering massive inflation (this was predicted) A pandemic that pumped even more money into the system, and a skyrocketing Fed rate that is reeking havoc on the economy, trying to turn the ship to avoid the ice berg, only to crash into another ice berg.
You buy bonds when the economy is failing, so does the horse lead the cart? Will pumping money into Bonds desimate Stocks? Who knows. but you cant have it both ways. A lot of my money has been locked up in cash accounts, GIC's and T-Bills, returning 4-5 %, and some is in bonds, and some in equities.
I believe in having cash ready to pounce when an opportunity presents itself, be it stocks, or Bonds, so this is where the money will come from for balancing. That is, if you took my advice a year ago and have the cash, if not well, your screwed, sorry.
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