By Ben Carlson
A Wealth of Common Sense
Short-term interest rates continue to charge higher as the economy remains stronger than anticipated.
We’re looking at 5% yields across the board for short-term government bonds.
Some people will still scoff at these yields by reminding you that inflation is still 6%, but let’s be honest — right or wrong, most investors think in nominal terms, not real.
The good news about 5% bond yields is that more conservative investors no longer have to stretch anymore.
Your expected returns are obviously much better when yields are at 5% than when they are at 1% or less.
Your asset allocation can change for any number of reasons.
Your financial circumstances or goals could change. Your willingness, need, or ability to take risk could change. The markets could change.
But there is an important distinction between an asset allocation decision based on risk vs. reward trade-offs and market timing.