Bonds are Better! The Right Tactical Choice for 2009

November 1, 2008 — Investing during the last several weeks within an environment of rapidly declining asset values and record volatility has been more about damage control than implementing a pro-active strategy. Given the extent of recent market losses, most asset allocations have seen sweeping, dramatic changes and as a result investors are now faced with difficult portfolio rebalancing and tactical investment positioning decisions. While we support the investment notion of employing a periodic rebalancing policy for strategic allocations, we would caution against an aggressive move back into equities at this time. Even given the magnitude of the sell-off across the global equity markets, when one weighs the macro environment, relative asset valuations and the probable upside and downside market scenarios, we believe a stronger case can be made for significantly enlarging allocations to the fixed income sector, especially high-grade credit, for better returns versus equities over the next six to twelve months.