Stocks For Show, Bonds For Dough
Not financial advice, just musings from a guy.
Right now (yes, it’s early, but yesterday, the press was all about the January Effect, still true, but):
S&P 500 = .45%
AGG = -.82%
So while the financial press is all about stocks (Elon Musk, Kathie Wood, et al), the bond market and foreign exchange market are many times larger, and this should never be forgotten.
We used to make fun of those that trade stocks as the minor leagues because the amount of capital that constitutes a “large transaction” in stocks wouldn’t show up on a bond trader’s radar (and a foreign exchange trader would laugh even harder).
Imma broken record: the Government of Singapore does not care about a stock analyst’s view of Mega (the old Facebook). Completely, utterly irrelevant.
The HUGE money cares about paying its financial obligations to pensioners.
They need to pay it in THEIR domestic currency, which means that they need to convert returns BACK to their own currency. This is why foreign exchange levels matter.
They are not watching CNBC to get their asset allocation advice among stocks and bonds. They are using the GLUE, their variation of it, as described here. Again, you do not need to know how to calculate the math, it is the principles that are important to understand, so that you understand the risks inherent in your portfolio as a whole.