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Country diversification generally works in peace time. Today, we are at war with Iran and that changes many factors including the dollar. In stress time, money tends to flow toward safe asset such as the US greenback is one them as reflected in the rise of the dollar in recent weeks.
The more important question is whether this is a short term trend or a structural issues. My view is that the strong dollar will pass in 6-12 months, and investors will refocus on the overall economy again. Inflation, federal debts, and others will return.
yep, first, stocks aren't the only assets in existence. second, many assets correlate to 1 in downturns, and ya tally more of these high correlation events within short periods.
When considering diversification, I often look at multi-year periods. Outperformance of U.S. equities or foreign equities is typically cyclical and lasts for several years. The 2009-2024 period of outperformance for U.S. equities was exceptionally long. As a2z alludes to, asset correlations often converge to "1" when the excrement hits the whirling blades.
During this war time, things are stressed and may behave irrationally such as now. I agree that taking a long perspective view help to see through the fog.
My active bond funds, RSIIX, NRDCX, and USFR may moved a penny or two in both direction. My other total bond index in 401(K) took a bigger hit. The magnitude is small relative to stock, so I will stay.
Since I am retiring this year, I have been reducing stock exposure since beginning of this year to <35%. Cash has increased to over 20%. I will not hesitate to go all cash when appropriate.
After some very early experiences (1970s/80s) with bond funds I decided that I had no tolerance for them. Too many factors well beyond my ongoing control. I've had very decent luck with buying Treasury, however. I buy for the interest, keep until maturity (2 or 3 years at most), and have no concern at all about day-to-day market evaluations. No surprises.
The Orange war started just after I moved out of my junk OEF into my junk ETF: SPHY. Consistently better monthly div with SPHY. Well, dooky, scum and slime. I expect stock ETFs to run up and down all day. I'm not happy to see SPHY doing it.
...And yet, with that long view in mind, I've learned to ride the junk OEFs up and down and then up again. And most of the time, the best thing to do is: NOTHING. I'm keeping a close eye on the portfolio in its entirety. Still down since the Orange war began, but no need to panic. I might find myself buying, because there is LITERALLY "blood in the streets." I hate myself for even thinking that, while the Orange child just told the world he may have to bomb Kharg Island a few more times, "just for fun." Just kill me now.
Comments
The more important question is whether this is a short term trend or a structural issues. My view is that the strong dollar will pass in 6-12 months, and investors will refocus on the overall economy again. Inflation, federal debts, and others will return.
yep, first, stocks aren't the only assets in existence.
second, many assets correlate to 1 in downturns, and ya tally more of these high correlation events within short periods.
Outperformance of U.S. equities or foreign equities is typically cyclical and lasts for several years.
The 2009-2024 period of outperformance for U.S. equities was exceptionally long.
As a2z alludes to, asset correlations often converge to "1" when the excrement hits the whirling blades.
My active bond funds, RSIIX, NRDCX, and USFR may moved a penny or two in both direction. My other total bond index in 401(K) took a bigger hit. The magnitude is small relative to stock, so I will stay.
Since I am retiring this year, I have been reducing stock exposure since beginning of this year to <35%. Cash has increased to over 20%. I will not hesitate to go all cash when appropriate.
...And yet, with that long view in mind, I've learned to ride the junk OEFs up and down and then up again. And most of the time, the best thing to do is: NOTHING. I'm keeping a close eye on the portfolio in its entirety. Still down since the Orange war began, but no need to panic. I might find myself buying, because there is LITERALLY "blood in the streets." I hate myself for even thinking that, while the Orange child just told the world he may have to bomb Kharg Island a few more times, "just for fun." Just kill me now.