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It does not pay to take on risk when the overall macro economic trend is negative.
- When the yield curve occurs, a recession typically happens within 12-18 months
- Bonds yield has not returned to its previous highs from its current levels of 3-4.5%
- Stock still offers the highest rates of returns in the long term horizon
- Shares of companies that do not produce a necessity tends to spike in late stages of a bull market
- Portfolio allocation horizon
short term portion of portfolio which you will need to access within 1 to 2 years should be placed in medium term bonds - mid term portion of portfolio which you will need to access within 3-5 years that will likely experience at least one recession should be place partially in stocks and partially in bonds - long term portion of portfolio which you will need to access within 10 years that will likely experience at least a few recessions should be placed fully in stocks