4 ms·

I’ve always been a “time in the market” is better than “timing the market” guy, but I find myself questioning that a ton in the current climate. When US bond yi

I’ve always been a “time in the market” is better than “timing the market” guy, but I find myself questioning that a ton in the current climate. When US bond yields started rising in the current market calamity, I was not surprised but definitely alarmed. As a “retirement saver” (not trader), what’s the best strategic hedge at the moment?

tossandthrow 1y ago
International diversification.
- itake 1y ago
  Can you explain more? The tariffs hit other country's stock markets harder than the USA's, as the trade represents a significant portion of a country's GDP. I guess the answer is to diversify away from the USA trade? But then to what?
  - tossandthrow 1y ago
    The question is if you consider yourself an active trader, ie. how do I optimize a trading path to maximum payoff, or if you are a passive investor. If does not sound like you are an active investor? For "paper assets" I apply, and would recommend, lifetime investment in a global, well diversified portfolio. Ie. I adjust my risk tolerance with leverage and not by picking positions. There is no reason why commodities, metals, crypto should not be a part of your "paper asset" portfolio. (I call it paper assets as "stocks" seems to mean ownership in companies, which is a bit too narrow - there are ETFs for most of this stuff) Housing is a personal question. As an investment it usually does not pay off and compares to stock picking / active trading.
  - rsynnott 1y ago
    > The tariffs hit other country's stock markets harder than the USA's ... Did they? Which countries? What made you think that? S&P500 is down about 9% YTD. FTSE250 (UK) down about 8% (but that's in pounds, and the pound is up 5% on the dollar). Shanghai Composite Index(China) is down 2.5%. Stoxx 600 (Eurozone, broadly) is down 1.5% YTD. The only big one where what you say _appears_ to be the case is the Nikkei 225 (Japan), which is down 15%... but remember that it's denominated in yen, and the dollar's down over 8% vs yen in the same time. As far as I can see, the only way you could even pretend this was the case would be by ignoring the decline of the dollar, and even _if_ you ignore the decline of the dollar that only really works for Japan, not Europe or China.
spacebanana7 1y ago
Retirement savers should never react to the news cycle. Even if you make a good trade and your hedge protects you from a downturn, you've "broken the seal" on trading. Amateur traders almost always lose money in the long run, and once you make a bunch of money on your first trade it's hard to stop. Like the curse of beginners luck on slot machines.
- tmountain 1y ago
  I agree. I guess my question was more focused on asset allocation in an era when the world seems to be moving away from the traditional relationship with the United States.
cik 1y ago
It depends which series of risks (or sequences) trouble you. Global diversification, in this instance has proven problematic - as evident by the varying (related) drops. Personally, I view my market investments as already fixed. I'd like a non-correlated asset, which means I'm looking at real estate. In my case, this goal isn't growth, inasmuch as defensive capital, or forced savings. I have the exposures you do, but added several, multi currency risks.
ajross 1y ago
Rising federal bond yields make them a better investment, more or less by definition, unless you're genuinely worried about default. But that said, I don't think (again, sort of definitionally) there is a "best strategic hedge" in the face of a trade war. In trade wars everyone loses. You can't meaningfully bet against a shrinkage of the global economy in aggregate.
- tmountain 1y ago
  I haven’t viewed default as a real risk beyond some true craziness happening like the U.S. willfully deciding to default on a payment. Better yields are a good incentive to buy bonds now but they simultaneously lower the value and desirability of exiting bond holdings. They’re also correlated to inflationary risks, so I guess it depends on your outlook on the future of the dollar too.
  - Galanwe 1y ago
    > I haven’t viewed default as a real risk beyond some true craziness happening like the U.S. willfully deciding to default on a payment. Well there are many ways to default, and many shades of default. I can very well see the current administration argue that China, for whatever reason, owes the US, and thus should be compensated by confiscating bonds.

tossandthrow 1y ago

International diversification.

itake 1y ago
Can you explain more? The tariffs hit other country's stock markets harder than the USA's, as the trade represents a significant portion of a country's GDP. I guess the answer is to diversify away from the USA trade? But then to what?
- tossandthrow 1y ago
  The question is if you consider yourself an active trader, ie. how do I optimize a trading path to maximum payoff, or if you are a passive investor. If does not sound like you are an active investor? For "paper assets" I apply, and would recommend, lifetime investment in a global, well diversified portfolio. Ie. I adjust my risk tolerance with leverage and not by picking positions. There is no reason why commodities, metals, crypto should not be a part of your "paper asset" portfolio. (I call it paper assets as "stocks" seems to mean ownership in companies, which is a bit too narrow - there are ETFs for most of this stuff) Housing is a personal question. As an investment it usually does not pay off and compares to stock picking / active trading.
- rsynnott 1y ago
  > The tariffs hit other country's stock markets harder than the USA's ... Did they? Which countries? What made you think that? S&P500 is down about 9% YTD. FTSE250 (UK) down about 8% (but that's in pounds, and the pound is up 5% on the dollar). Shanghai Composite Index(China) is down 2.5%. Stoxx 600 (Eurozone, broadly) is down 1.5% YTD. The only big one where what you say _appears_ to be the case is the Nikkei 225 (Japan), which is down 15%... but remember that it's denominated in yen, and the dollar's down over 8% vs yen in the same time. As far as I can see, the only way you could even pretend this was the case would be by ignoring the decline of the dollar, and even _if_ you ignore the decline of the dollar that only really works for Japan, not Europe or China.

spacebanana7 1y ago

Retirement savers should never react to the news cycle. Even if you make a good trade and your hedge protects you from a downturn, you've "broken the seal" on trading. Amateur traders almost always lose money in the long run, and once you make a bunch of money on your first trade it's hard to stop. Like the curse of beginners luck on slot machines.

tmountain 1y ago
I agree. I guess my question was more focused on asset allocation in an era when the world seems to be moving away from the traditional relationship with the United States.

cik 1y ago

It depends which series of risks (or sequences) trouble you. Global diversification, in this instance has proven problematic - as evident by the varying (related) drops. Personally, I view my market investments as already fixed. I'd like a non-correlated asset, which means I'm looking at real estate. In my case, this goal isn't growth, inasmuch as defensive capital, or forced savings. I have the exposures you do, but added several, multi currency risks.

ajross 1y ago

Rising federal bond yields make them a better investment, more or less by definition, unless you're genuinely worried about default. But that said, I don't think (again, sort of definitionally) there is a "best strategic hedge" in the face of a trade war. In trade wars everyone loses. You can't meaningfully bet against a shrinkage of the global economy in aggregate.

tmountain 1y ago
I haven’t viewed default as a real risk beyond some true craziness happening like the U.S. willfully deciding to default on a payment. Better yields are a good incentive to buy bonds now but they simultaneously lower the value and desirability of exiting bond holdings. They’re also correlated to inflationary risks, so I guess it depends on your outlook on the future of the dollar too.
- Galanwe 1y ago
  > I haven’t viewed default as a real risk beyond some true craziness happening like the U.S. willfully deciding to default on a payment. Well there are many ways to default, and many shades of default. I can very well see the current administration argue that China, for whatever reason, owes the US, and thus should be compensated by confiscating bonds.