But…US Long Bond Crushed
Again, dilutive to absolute performance for diversified portfolios. Substantial allocations here make 100% sense from a portfolio construction point of view. But, this is problematic for reasons not in the headlines.
a. The largest investors in the world are watching this, FIRST. They do not care about the price of TSLA.
b. If they re-allocate TOWARDS bonds (as would be their natural inclination because they are matching liabilities which last for decades, not the next quarter’s earnings): that would need to come from…stocks.
c. We aren’t going to get a newsflash to say “Swiss National Bank plans to re-allocate 500 billion out of Apple into the long bond.”