"The Great American Bond Bubble" - Jeremy Siegel and Jeremy Schwartz via The Wall Street Journal August 18, 2010
"Bonds - Heading From Bull Market to Bubble?" - The Wall Street Journal September 15, 2012
"Definitive Proof that the Bond Bubble Just Popped" - Wyatt Investment Research via Nasdaq.com September 3, 2013
The current market environment continues to test the resolve of US investors, many of whom are questioning the bond allocation within their portfolios. In 2013, the most widely cited measuring stick for bond market returns, the Barclays US Aggregate Bond Index, declined roughly 2%, marking the index's first calendar year decline since 1999 and just the third such decline since US interest rates peaked in 1981 (Source). Since the advent of modern portfolio theory and by extension diversified investment portfolios, bonds served as a counterbalance to more variable investment categories such as stocks and commodities. In
The relentless winter weather this year has certainly spawned discontent for many across America. Fortunately, the threat of more snow and ice will soon give way with the onset of spring and the arrival of warmer days. Many participants in capital markets have also found themselves mired in an extended spell of discontentment that has spanned for more than a decade. But unlike the steady changing of the seasons, the problems that continue to plague investment markets may persist in a seemingly endless winter that never turns to spring. And with this discontent comes risks that should continue to be evaluated carefully when managing investment portfolios today.
The critical flaw with capital markets is deeply ingrained. It has little to do with the stock market and its ability to go up. If anything, the rising stock market is just one of the many symptoms of the underlying problem. Instead, it
This article explains a semi-monthly tactical strategy that combines three of my previous strategies with slight modifications into a unified strategy for larger ($100K - $1000K) retirement accounts. Up to four ETFs are traded at the beginning of each period. Backtesting to the beginning of 2008 shows this strategy produces low annual volatility (< 9%), low maximum drawdown (< 9%), positive annual growth every year, and high compounded annual growth rates (CAGR ~ 20%). The Sharpe Ratio is 1.85 and 70% of the periods have positive growth.
I call this strategy the Unified Tactical Strategy, or UTS. It combines active risk mitigation to avoid large drawdowns while, at the same time, providing significant annual growth and no negative-growth years. UTS is a much better way to invest retirement savings than the more common "buy and hold" strategy used by many investors and advocated by many financial advisors. No one wants