Investor allocations to cash and bonds are approaching levels that deserve attention.
The risk is twofold:
1️⃣ Market risk
Extremely low cash and bond allocations can be a late-cycle warning sign, when investors are heavily positioned and markets may be more vulnerable to a reversal.
2️⃣ Portfolio risk
Investors may be underprepared for a drawdown, with too little defensive exposure if markets turn lower.
But there’s a bigger question.
Most investors are positioned for a repeat of the 1970s. Far fewer are prepared for a repeat of the 1920s. And fewer still are considering a third possibility.
What if neither scenario plays out?
What if yields simply gyrate within a new, higher range?
Markets don’t have to repeat history exactly. The real risk may be assuming they will.
Markets are always moving - and sometimes, the best move is knowing what works for you.
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