Don't Wait: Right Now Is an Excellent Opportunity to Rebalance Your Portfolio
Written by Adam Levy for The Motley Fool -> The relative performance of stocks to bonds over the past year has been well out of the ordinary. The market outlook remains very strong, while bonds could see interest rates climb higher still. But this key indicator suggests a reve
The relative performance of stocks to bonds over the past year has been well out of the ordinary.
The market outlook remains very strong, while bonds could see interest rates climb higher still.
But this key indicator suggests a reversion to the mean could be in store for investors.
As the S&P 500 (SNPINDEX: ^GSPC) has climbed from one all-time high to another over the last year, many investors have probably seen very strong returns for their portfolios. The benchmark index has climbed 27% over the past 12 months, with AI stocks leading the way. The tech-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) is up an impressive 39% in the same period.
But the strong performance of stocks over the past year hasn't been matched by other asset groups. For example, U.S. long-duration bonds, such as those held by the iShares 20+ Year Treasury Bond ETF (NASDAQ: TLT) , have returned close to nothing over the past year. As a result, many portfolios may be unbalanced. Instead of waiting, investors should consider rebalancing right now.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Stocks typically outperform bonds over the long run, but the recent one-year relative performance of stocks to Treasuries sits in the 95th percentile of all 12-month periods dating back 50 years.
The stock market's performance has been extremely impressive, and for good reason. S&P 500 companies reported earnings growth of 28.6% in aggregate last quarter, the highest level since the fourth quarter of 2021, according to FactSet Research. Eighty-five percent of companies beat estimates last quarter. The outlook remains strong as well, with many analysts raising earnings expectations. They now expect aggregate earnings to grow 22.6% for the full year.
