Unusual year. Why?

Such an unusual year for the markets Such an unusual year for the markets.

All the investors were educated in a way we would expect a negative correlation between fixed income and stocks.

We were tough that if we wanted to decrease our portfolio volatility we should balance our portfolio with fixed income investments, since the are offering "Fixed Income".

But for the last 18 months, both, stocks and bonds have lost a lot of value (bonds started to decline in valuations in September last year)

Why is the reason behind it?

Many analysts are saying that bonds lost in value is due to an exponential increase in interest rate, so many investors would flee from Fixed income investments, but where did all that money go? that money usually goes to equity investments. But now, all that money flew from Equities and Fl, to cash, US Dollar TBILLS and some Cryptocurrencies. But also, and most important of all, I truly believe that all the cash it was used by main street to sustain a new life style but with the highest levels of inflation observed in several decades.

What is next?

Many people are facing difficulties to sustain their lifestyle and they cannot afford to save/invest properly. Especially retail investors which is a new trend for investments, fear these violent turns in equity markets. So, in my opinion, these new lows of the year will stay there for at least another 6 months. While people accommodate their investment strategy and they fit into a new monthly budget.

So what happens with bonds and Stocks?

In my opinion as soon as the CPI Numbers peak, Bonds will increase in value rapidly, while the stocks still have to take several hits (reduction in margins, laying off people, cost reductions, less demand).

Trade safely