Labeling a particular stretch of time ordinary, extraordinary or just plain weird is one of those tasks that fall under the heading of subjective analysis. But we’ll risk it and proclaim that ours is an extraordinary moment in time, perhaps even weird.
We speak from a strategic perspective on the subject of asset allocation. As we’ve noted before, bull markets are in blossom everywhere, in virtually every asset class. While that’s good news for calculating the profits on former investments, it raises doubts about what’s coming.
Before we go any further, let’s admit that timing the markets isn’t our forte. In fact, we’re skeptical that any one harbors such a talent, at least when measured over a business cycle or two. Our preference is one of rebalancing based on the signals Mr. Market dispenses. If asset A is up 10% over the past year and asset B is down 10%, we’re inclined to take profits from A to feed B. Yes, that’s a dangerous game with individual securities, but it carries an impressive pedigree when dealing exclusively in asset classes. The reason: asset classes don’t go bust, which is more than we say for individual securities.
But there’s always a glitch, even in the best-laid plans. The last few years have provided strategic-minded investors with a conundrum. Indeed, if everything is up, then it stands to reason that nothing is down. As a result, the prudent course for rebalancing is less than obvious and fraught with more than the usual dosage or risk.