Having said this, however, we should also mention that it is long past the time for higher bond yields. Early in our careers, there was a time when the ten year bond sported double digit yields — as high as 15.22% in September of 1981 — and we have witnessed the long zig-zagged decline in yields from that period. It’s probably too early to claim that a floor in U.S. bond yields has been reached, but if the bull market in stocks is long in the tooth, then the secular bull market in bonds has lost its teeth and is also missing a lower jaw.

In this investment environment, with stocks hitting record levels and bond yield curves portending a recession, “head scratching” may well be a useful response. It certainly suggests that caution should be the emphasis among investors over the next six months.

Rebalancing portfolios to long term goals makes a lot of sense: equity positions in balanced portfolios are likely above desired levels following double digit stock returns in the first half of the year.

In the fixed income portion of balanced portfolios, we recommend keeping maturities in the higher grade, intermediate term range (ten years or shorter): more than ever, now is not the time to reach for somewhat higher yields in longer term and/or lower quality bonds.

And although overnight yields are strongly rumored to be headed lower, we think a little cash would not be unwise. No one can accurately forecast the timing of a stock market crash or a long overdue increase in bond yields: having a little extra cash in reserve can soften the blow and allow investors to take advantage of lower prices in the future.

Not Investment Advice or an Offer
This information is intended to assist investors. The information does not constitute investment advice or an offer to invest or to provide management services. It is not our intention to state, indicate, or imply in any manner that current or past results are indicative of future results or expectations. As with all investments, there are associated risks and you could lose money investing.