One small addendum, that I should have featured more prominently.
It is exactly that rise in the return from cash and even short-term bonds that constitutes a headwind for stocks. After all, if one can get even a 4% return more or less risk free, the reasonable investor will demand a greater return from stocks. In turn, that means the starting point (price) for stocks needs to be lower.
It is that specific dynamic that causes me to spread my allocation between all 3 asset classes, including a meaningful portion in cash.
One small addendum, that I should have featured more prominently.
It is exactly that rise in the return from cash and even short-term bonds that constitutes a headwind for stocks. After all, if one can get even a 4% return more or less risk free, the reasonable investor will demand a greater return from stocks. In turn, that means the starting point (price) for stocks needs to be lower.
It is that specific dynamic that causes me to spread my allocation between all 3 asset classes, including a meaningful portion in cash.