Again, that rebalancing would also include moving monies to other risk managers as well, if stock prices continue to increase dramatically. The all-weather portfolio can include some gold, bitcoin and commodities. Just rebalance as you would with your bonds. The all-weather portfolio can provide better returns and better risk-adjusted returns compared to a traditional balanced portfolio that is composed of stocks and bonds. I’ll be back in the future with a post looking at that all-weather portfolio.
If you feel your portfolio is overexposed to longer-dated bonds and rising interest rates, you might move to shorter-duration bonds or ETFs; you can look at floating-rate bond ETFs and short- to mid-term bond ladder ETFs. You might even consider a GIC ladder for a segment of your portfolio.
All said, if we rebalance to bonds today and along the path of a rising-rate environment, we will be picking up some greater yields and lower prices.
We like when our stocks go on sale—so why not embrace our bonds when they go on sale?
Global shares play catch-up
At the beginning of this week, global shares hit a fresh peak with advances that are 11 days running. While many stock markets have lagged the tech-heavy U.S. market, developed markets such as those for Europe and Britain and Japan have been posting very solid and consistent gains.
In fact, the Nikkei (Japan’s stock market) is back above 30,000 for the first time in three decades. Wow, talk about lost decades for stocks. From that link…
“Japan’s Nikkei share average rose above the 30,000 level for the first time in more than 30 years on Monday, as it regained the ground lost during decades of economic stagnation.”
The developed markets stock index (developed nations excluding U.S.) has lagged, but it’s playing catch-up, if in modest fashion. The developed markets EAFE (Europe, Australasia, Far East) has outperformed U.S. markets from Nov. 1, 2020, after positive vaccine approvals gave another boost to the stock market rally that is still in progress.