Stocks beat bonds over the past decade by one of the largest margins in recorded history. Financial advisors who spent that entire time telling clients to own both asset classes just watched their diversified portfolios get absolutely demolished by a simple S&P 500 index fund. The reward for following professional advice was underperformance so severe it qualifies as malpractice in any other industry.
Now those same advisors are back with exciting news. Bonds represent maybe the best buying opportunity in decades. The pitch requires you to believe that the thing that got crushed for ten straight years is about to reverse course because the people who were wrong for ten straight years suddenly figured it out.
The headline admits diversification wasn't needed. Past tense. As in, you should have ignored it completely. But now? Now you need it. The timing works out perfectly for everyone who already missed the entire run.
Retail traders who bought bonds in 2020 because diversification sounded responsible got to watch their inflation-adjusted returns turn negative while their neighbor who bought Tesla stock retired early. They held through rising rates. They held through multiple Fed hikes. They believed in mean reversion right up until their portfolio was worth less than a used Honda Civic.
The technical setup here is flawless if you squint hard enough and ignore the past decade. Bonds are cheap relative to stocks using metrics that didn't matter when stocks were going up but definitely matter now that bonds need to be sold. The 10-year spread reached historic extremes, which means absolutely nothing except that it happened and someone measured it.
Buy bonds now and in ten years you get to be the guy telling everyone about the buying opportunity you definitely saw coming while stocks outperform again.
Photo by Oren Elbaz on Unsplash
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