I suggest waiting for another interest rate hike or two. We’ll see whether this is a TINA market, or a real bull, when that happens.
RE: I suggest waiting for another interest rate hike or two. We’ll see whether this is a TINA market, or a real bull, when that happens.
For those who don’t know — T.I.N.A — THERE IS NO ALTERNATIVE.
Think of a portfolio manager who is charged with earning a return for investors and can assume a moderate amount of risk. Let’s suppose he’s been running a portfolio of 25% US stocks, 25% international stocks and 50% fixed income (I can’t tell you how many portfolios have looked like this in real life for the last few years). Now assume he reads a bunch of research and news and concludes that the market is due for a ten to twenty percent sell-off. And so he sells half his stocks, putting a quarter of his portfolio into wealth-destroying money market funds.
Days go by. Weeks. In the end, he buys back into the stock market again – maybe even buying some of his old positions back at slightly higher prices.
Why does he do this?
T.I.N.A. – There Is No Alternative.
The alternative he has is to own aburdly-priced bonds, buy highly volatile commodities, or go into less-liquid assets like real estate or private equity. In other words, for most PMs there is no alternative.