The inverted yield curve argument does not hold water for me. It doesn't matter that the yield curve is inverted so much as why it is inverted, and what 1,000 other macro forces are going on at the time. The fact that investors didn't correctly predict fed easing over the last 2 years doesn't mean there's some huge bubble and we're all doomed.I fully agree that the stock portion of your asset allocation should be diversified beyond just the S&P 500. I prefer VTWAX/VT because the philosophy of that fund just makes Boglish sense to me.Yeah, but the previous poster do make a good point about the risk of being just 100% S&P 500 for the stock portion. There have been periods like quoted above when you could have easily owned something other than just 100% S&P 500 for the stock portion of the portfolio. Having 25% to 50% in something else would have avoided truly catastrophic results, especially those in and nearing retirement. Right now, small, value, intl, and em are not highly valued compared to s&p 500. It makes sense to review the portfolio to see if anything needs to be done to diversify away a bit from LCG. The gap between Growth and Value is at an all time high (last I posted on this was before the year end 2023, since then it has widened even more). It's not that difficult to add some small caps and intl if not already owned and it won't be a huge deviation in any shape or form.Don't you just love purple hares like this? "My god, Watson, a purple hare! The only other times humanity has seen a purple hare, a pandemic has followed! Run for the hills!"Following is a disturbing data fact that is relevant to the "anything wrong with a 100% S&P 500 Portfolio" question. In the past 100 years, there have only been three prior periods during which the 2 Year / 10 Year treasury bond yield curve was inverted for more than 500 days (1929, 1973 and 1999). In all three instances, the inverted yield curve period was followed by a stock market correction of more the 50%. Currently the 2 Year / 10 Year treasury bond yield curve has been inverted for more that 650 days.
Cause? Effect? Coincidence? Crystal ball!?!?
Yes, we're all looking for a crystal ball, aren't we?
But wait a minute. What happens if we actually find it? Would we believe it? The ball, I mean.
If the present inverted yield curve is telling us another major crash is coming, sell now, right? Or wait? Or maybe sell when the signs are clearer? If in doubt, is there another yield curve we could consult, to be sure? Certainly just one more, and we'd be sure, right?
But if we sell, when will we buy back? Is there another crystal ball we can consult then? How about those yield curves? Are they as useful on the way up as they are just prior to the crash?
1929, 1973, 1999...all good years to sell, and to buy, depending upon your timeframe! I note that the S&P 500 is up considerably from 1929, 1973, and 1999.
Is there a lesson in any of this? Why, absolutely not!
Carry on.
Also... there might be some huge bubble and we're all (temporarily) doomed. Who am I to know?
That said there's nothing "wrong" with owning 100% S&P 500 for some individuals in some circumstances (discussed at length in prior posts). But as for me I want more diversification, which is why in addition to vlarge cap US stocks, my equity portfolio has mid/small cap US and some international. Only the future will tell if my AA ends up with more money than pure S&P 500, but I like my chances.
Statistics: Posted by esteen — Tue May 07, 2024 12:58 am