There have been many classic debates in popular culture over the years. In technology we’ve had PCs versus Mac, and then Droid versus iPhone. In beverages, we’ve had Coke versus Pepsi, while in entertainment we’ve suffered through Team Edward versus Team Jacob. And baseball will always have the Red Sox versus the Yankees. Even in investments, we have had our own ongoing version of a great debate, which has been simmering for a few years, yet this one involves asset allocation and is much more meaningful and significant: will there be a “great rotation” out of corporate bonds into equities? Read more
Posts tagged ‘Great Rotation’
The 2008 meltdown is finally in the rear view mirror. The global economy has moved on.
But the current market rally is driven largely by the growing sentiment that the worst is over: America has not gone over the fiscal cliff, the Eurozone has not split, China has not had a hard landing, and the price of oil has not spiked despite the unrest in the Middle East.
Previous rounds of quantitative easing in Europe and the U.S. have prevented all-out deflation. The latest round is the most potent. Markets have struggled to shrug it off.
Equities are set for a bounce. They look attractive relative to bonds. But the ice age for equities will thaw only when economic fundamentals begin to look stronger and more sustainable. The much-predicted stampede out of bonds will occur later rather than sooner – if there is one. Read more