Stocks And Bonds Can Rise In Concert
Dragonfly Capital | Aug 29, 2014 10:55AM ET
Plenty of smart people are making the rounds talking about how rising bond and stock prices cannot go on forever. To me the argument is like saying that cats and dogs can't get along. One point made is, “How can there be demand for both a risky asset -- stocks -- and a risk-free asset -- bonds -- at the same time?” Another point put forth is that "as bonds rise in a flight to quality, stocks will inevitably need to fall." I do not know when these arguments became gospel.
But I beg to differ. There is no reason that stocks and bonds cannot rise together. And history is on my side.
The chart above shows that from 2003 through 2007, (stocks) and (bonds) rose together. That's a period of 4 years. And just how long have they been moving together recently? Just about 1 year. Hardly a stretched situation. So forget about the incorrect but accepted historical view and focus on the actual history. Not only can cats and dogs get along, but so, too, can stocks and bonds move higher together.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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