Sean Hyman
Contributing Writer
instructor@mywealth.com
One thing is for sure in the financial markets. You can always count on investors to take things to extremes. Through the years, we've seen many market extremes: the internet bubble, the tech bubble, the Chinese stock market bubble, the U.S. real estate bubbvle, etc. Want to know the next one brewing even now?
The Bond Market Bubble!
In an attempt to "run to safety", too much money has run nto the bond market. Heck, you're not even earning any interest on your treasuries at these extreme levels!
The moves have been parabolic lately as shown by the chart below. Check it out.
With this "Bond Bubble", bonds are quickly becoming more risky all the time!
Typically, bonds are thought of as "low risk" instruments. However, this is not one of those times. Anytime ANY financial instrument skyrockets, it takes on a whole new level of risk...and that even includes bonds.
You may never see another time in your life where bonds do this. However, its important to consider reallocating some of your bond market profits back into the beaten down stock market. Yes, you heard me correctly!
Bubbles last longer than we all think....so I can't say this bubble is bursting on Monday morning. It may not burst for days or weeks and it could even last months.
However, what I do know, is that those that diversify away from bubbles before they pop are always glad they did afterwards. This doesn't mean to take all of your money out of bonds. But what it does mean is that you may need to do the thing that seems to be "unconventional wisdom" right now and move a lot out of bonds and ease back into stock mutual funds or ETFs that are broadly diversified. At this point, stocks probably have more upside than downside over the long haul. However, bonds COULD have a horrific fall in the near term or if not, at least in the longer term. It's hard to time the popping of a bubble but they are easy to spot on a chart for those who can calm their greed enough to acknowledge them.
So, consider making some adjustments to your portfolio. Over the long haul, you will be glad you did.
Sean Hyman
Head Instructor
www.mywealth.com
shyman@mywealth.com
