The junk bond market is pricing in more pain / risk / growth deceleration while U.S. stocks are sanguine. Stocks behind the ball as usual?
Independent Investment Management and Financial Planning
In my Q1 market review, I mentioned that both U.S. bonds and stocks were down together for the quarter, and that was a relatively rare occurrence. I mentioned that only happened 8 other times in the previous 30 years. This was concerning for a few clients.
The primary reason it was concerning for some clients is that I generally have portfolios positioned more conservatively than I would in a more “neutral” environment. In other words, I have a targeted range to which I am bound for each client and am currently positioned on the conservative end of that range for most clients. The reason for the relatively conservative positioning is that I am concerned about stock market valuations (i.e. stocks are about as, or more, expensive as they were in 1929 and 2000…depending on the metric).
So when both bonds and stocks decline together it makes folks nervous. After all, isn’t the idea that bonds will hold up when stocks are declining? To add insult to injury, bonds actually declined MORE than stocks in the first quarter. As a result, several clients asked me, “Why did that happen?” “Will it continue?” “Is this still the right strategy?” Continue reading “Question I Was Asked In Several Quarterly Client Meetings”