Stocks Vs Bonds YTD

Bob Stowe |

We have been asked many times this year whether it is time to rebalance. The two main investment groups are stocks ands bonds.

Yet, year-to-date the total stock market and total bond market are both down 15-20%. What would we sell and what would we buy in a rebalance when all of the world’s assets generally went down?

All corrections aren’t the same. This correction is the other side of the 2021 ski slope where everything we owned went up. In a normal correction, one asset stays up and, as the value discrepancy becomes large, we sell some of the relatively expensive asset and use the money to buy the cheaper one. In this case, all stocks and bonds got cheaper at the same time and almost at the same rate. Blame rising interest rates as all prices get discounted more heavily as rates increase.

One of the more perverse outcomes is that an all-stock portfolio barely lost more value than a 60/40 portfolio, so far this year. We continue to believe this is temporary and that rising interest rates are helpful overall, but may be too much of a good thing in the short-term.