OTL Stocks and Bonds

Aloha,

I am assuming the Board shall slow down with lack of sports…so I will squeeze in with an OTL item. My thought is there is an incredible wide and deep level of knowledge of our Board members. From sports, military, medical, agriculture, finances, etc…
So, with the Stock Market Crash of 2020, why are Bonds and Gold also moving in the same direction as Stocks (down) for the week? Now maybe come Friday they will start acting normal again (Stocks and Gold generally run opposite of Stocks on big moving days).
But this is the first time I have seen this trend. Perhaps people are selling and holding the cash and not moving into Bonds and Gold. Waiting to invest when the Market surges back up?
What do our experts think?

I am not an expert, but my Money manager has had me balanced for many years and this is the first time this has happened that I can remember. It could be what you said as the yields on bonds have gone very low. The best thing to do is set still if you have a folio that suits your age and risk tolerance.

Everything is correlated right now. Few hedges working. As you’ve seen w all sports being canceled, a first, unexplainable things occurring everywhere, even financial markets

We’re buying. We bought some Beyond Meat stock about a week ago and getting out more out of savings to invest more in other stocks.

Time in the market is more important than timing the market. That’s a good adage that I always use in times like this. I’m about 70/30 equities/bonds, it’s what my portfolio manager decided on, based on my income needs, and risk tolerance. My dividends average about 4%, so, unless they all quit paying them, there is no need to job out of the market, I can’t get that for my cash accounts.

In times of crises, like a pandemic. Cash is king. Many sell stocks that are likely to be most hurt by the crisis. Hold the cash for reentry into the market at a later date. Always listen to the “Sage of Omaha”. That’s what he does.

I’ve been in the business for two decades. To answer the main question from the OP, there is a lack of liquidity in the bond market right now. Prices should be going up but there’s not enough buyers to satiate the sellers. Hence, why the Fed announced an injection of $1.5T of liquidity into the bond market.

If I wanted to sell a bond right now that the market would normally dictate a premium and say a total price per bond of $120…my bid might be more like $85-90. That should correct itself over the next week or so.

Everything is in a crisis mode. Measures to change the downward momentum that worked in the past haven’t worked now. The virus is spreading like a Crichton book scenario. A worldwide recession looks inevitable. Political leadership looks befuddled and inept. The health care system is not working to contain the situation. Corporations are over leveraged due to the decade of low interest rates. The Middle East and Russia are squaring off over oil. As far as gold, it is being swept up in the “When in doubt, get out” mentality. You can’t eat or drink gold. As much as we think we are smart and powerful, Mother Nature can slap us back down in a New York minute.

My advisor moved about half of my portfolio to cash when the market had dropped about 8%. He left the dividend paying EFT’s in the market because they have paid pretty much the same dividends regardless of share price. He says he will gradually start buying back in when he thinks the bottom has been reached and the market will swing back. But man, it’s hard to look at the Mint app a few times a day and not get nauseated.

Unknown whether we have seen the full impact on company earnings & the economy or whether current stock market valuation contemplates future economic fallout. The stock market was grossly overpriced, but duration of the virus & the Saudi/Russia oil price wars remain unknowns. Currently sitting on the sidelines until I decide when to reenter the market. Not a proponent of timing the market nor do I agree with a buy & hold strategy. Will buy balanced (stock/bond) indexed mutual funds as a long term strategy.

I would agree completely with this assessment. The Saudi/Russia aspect has nothing to do with the virus other than the timing, but it plays a role too.

So, you sold out of your positions, or plan to allocate more money later? 99.9% of the public, and probably about as many of the professionals can’t time the market, if its an investment, it’s best to stay the course.

The virus was Putin’s opportunity to start the oil price war per recognizing the virus was already causing an economic downturn in the US. Russian price war is Putin’s efforts to put US oil companies out of businesses as punishment for US sanctions against Russia & the US being the largest oil exporter. Who knows how long Russia will continue the price war.

Agree about not timing the market but there were indicators in January that it was time to exit due to a market that was too hot & overpriced. I sold out of the market in early February. When to get back into the market is the hard part since US companies will likely struggle over the next few months, assuming the virus & oil price wars are resolved. Not sure the current market has priced in the weak economic numbers yet.

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Should have waited until mid-Feb to sellout, just think of all that money you left on the table…

Need to be buying shares of Charmin. :wink:

There you go…an INVESTOR as in buy the dips, I’m with you.

Up +9% (1985) today. Most likely have not seen the last
of the extreme volatility, but we’ll be OK. :sunglasses:

Seems like when the market drops X% my portfolio goes down 20K. When it goes up X% my portfolio goes up 5K.

Lol, I was just checking mine for the fund closes, I’ve noticed the same correlation!

My daughter is high up at P&G. She has told me some stories. But I can’t share.