The "stocks return 10%, why buy 5% bonds?" argument collapses when you adjust for valuation and cycle position.
Equities today trade above their long-term exponential trend — a level reached only in 1929, the 1960s, and 2000. Mean reversion is not a timing tool, but it does frame expected returns. At current valuations, history suggests 10–20 year equity returns could fall to 0–2% annualized during secular adjustment.
Meanwhile, the regime has changed. For 15 years post-crisis, the Fed suppressed rates and ran QE. Cash paid nothing. Bonds paid nothing. TINA — There Is No Alternative — forced capital into equities regardless of price.
Today, Treasuries yield ~5%. Structure the duration, hold to maturity, collect interest, get principal back. You're paid to wait. Pension funds and institutions are reallocating accordingly.
The shift isn't "sell all stocks." It's that equities finally face real competition for capital. TINA is dead. At stretched valuations, 5% bonds deserve serious consideration.
Equities today trade above their long-term exponential trend — a level reached only in 1929, the 1960s, and 2000. Mean reversion is not a timing tool, but it does frame expected returns. At current valuations, history suggests 10–20 year equity returns could fall to 0–2% annualized during secular adjustment.
Meanwhile, the regime has changed. For 15 years post-crisis, the Fed suppressed rates and ran QE. Cash paid nothing. Bonds paid nothing. TINA — There Is No Alternative — forced capital into equities regardless of price.
Today, Treasuries yield ~5%. Structure the duration, hold to maturity, collect interest, get principal back. You're paid to wait. Pension funds and institutions are reallocating accordingly.
The shift isn't "sell all stocks." It's that equities finally face real competition for capital. TINA is dead. At stretched valuations, 5% bonds deserve serious consideration.