April 2021
The past 60 days has seen a pretty sloppy market. I did not feel comfortable taking the market risk associated with all the uncertainty in stimulus payments, Federal Reserve policy, and basic economic indicators as we emerged from the COVID-19 pandemic. I have taken larger losses with these bond funds than I would have liked. I expected a move to the bond market with the amount of uncertainty in the markets, but since they are paying less than treasuries and way less than inflation, equities are gathering all the attention.
I am now comfortable moving my investment and retirement money back into the broader market at the percentages you see above. I have four reasons:
1. While the market has been unstable, it seems to have found a general level of "resistance" across all the indices, making further major moves lower unlikely
2. Government stimulus looks to continue and the introduction of the infrastructure bill did not raise any surprises (I believe this will benefit the small caps more than the S&P 500, hence my larger weighting on those funds)
3. The Federal Reserve signaled multiple times over the last two months that it does not intend to raise rates in the near term
4. As stated above, bonds are yielding less than treasuries
While there is definitely a great deal of uncertainty in the world in general, the markets have been able to deal with defaults (Archegos) larger than Long Term Capital Management with barely a hiccup (read the book if you haven't), dramatic shifts in trader activism (e.g., GME), and additional safe harbors (e.g., Bitcoin vs gold).
I'm still concerned about rising inflation, I see it every week at the grocery store and Home Depot, but until bonds start to beat real inflation numbers, investors will continue to invest in equities. Keep Investing!
