“Humans are exceptionally adaptable. Investors will adapt to the new rate environment rapidly, if they haven’t already. Many individuals and large pools of capital alike have likely already shifted from stocks into money market funds and bonds yielding 5%.”
Is this empirically true? We entered ZIRP policy in 2009 but it took several years (during which first derivative on rates was zero) for investors to appreciate what that should mean for equity multiples.
As for investors rotating into bonds, most of the charts I see still show equity allocations as percent of overall portfolio near/at all-time highs. (Obviously that’s tough because m2m impacts if, so maybe inflows/outflows are better metric, but haven’t seen/heard about huge equity fund outflows and bond fund inflows.)
Loved this and generally makes sense. One thing:
“Humans are exceptionally adaptable. Investors will adapt to the new rate environment rapidly, if they haven’t already. Many individuals and large pools of capital alike have likely already shifted from stocks into money market funds and bonds yielding 5%.”
Is this empirically true? We entered ZIRP policy in 2009 but it took several years (during which first derivative on rates was zero) for investors to appreciate what that should mean for equity multiples.
As for investors rotating into bonds, most of the charts I see still show equity allocations as percent of overall portfolio near/at all-time highs. (Obviously that’s tough because m2m impacts if, so maybe inflows/outflows are better metric, but haven’t seen/heard about huge equity fund outflows and bond fund inflows.)