Secular Bull And Bear Markets
If an investor was lucky enough not to have money invested in stocks during the 50 worst days over that 35+ year period, the annual return that fortunate investor would have received would have been more than 21 percent annually…almost double the return the “buy and hold” investor received.
Consequently, I hold the view that, to a limited degree, making an attempt to add value to portfolios with slight tactical overweight/underweight decisions regarding U.S. equity exposure has the capability of adding serious positive results to a “buy and hold” strategy.
Investor sentiment and attitudes towards risk assumption are somewhere between the bookend extremes witnessed in 2000 and 2009.
Unfortunately, the same can’t be said about the current state of the global bond market. Notice the similarity of today’s bond market and the stock market of 2000. Overvaluation (negative interest rates), low correlation and narrow leadership (sovereign bonds outperforming other segments), record high prices (record-low interest rates), extreme mutual fund inflows (current total inflows into mutual bond-funds is among the highest we have seen in two years), and capital gain creation a “core” goal (again, negative interest rates). I maintain the stance that bonds may not generate historically-normal return patterns going forward. The bond market has been experiencing its long-term secular bull for more than 30 years without a meaningful correction. This too shall end.
….. if the current bull market “walks like a duck, quacks like a duck and flies like a duck, then it is probably a duck