- A common view on Wall Street is that equities always do better than bonds and cash over a multi-decade holding period
- In reality though, this depends on the start date
- Stocks ar though to do better because they have more risk (and should garner a higher return)
- When short-term rates are near or higher than inflation, bonds are more popular
- allow savers to maintain purchasing power without taking lots of risk
- can drive down the demand for stocks
- When short term rates are low, saves are forced into longer-term debt securities or stocks to try and maintain purchasing power
- Bonds provide a relatively low but stable return
- Stocks provide a lower return than bonds (dividends), but stable return
- Stock prices are quite volatile to economic and deflationary/inflationary cycles
- Bonds or stocks can be better depending on when buying Bonds and stocks in the broader economic and inflationary/deflationary cycles
- Stocks tend to do better than bonds during an inflationary cycle
- Bonds tend to do better than stocks during a deflationary cycle
