asset allocation 1959-2012bonds vs equities flows since 2006Market Paradoxes, The Great Rotation And Asset Allocation

Fidelity says there are three market paradoxes to ponder: 1) The U.S. economy appears to be recovering and the Fed is tapering off QE, yet 10-year Treasury yields continue to fall, 2) major stock indexes have so far traded sideways, yet beneath the hum-drum headline index numbers there has been violent rotations between sectors and styles, and 3) perceived troubles in China have led investors to developed markets.  Meanwhile, “this year, there’s been a pause in the Great Rotation…bond inflows are ahead of equity inflows year-to-date once again.  As a result, the longer-term move into bonds and out of stocks is still enormous: $1.2 trillion into fixed income funds since 2006 versus a negative $800 billion pulled from stock funds.”  Which is all the more surprising given the “whole bunch of reasons to short bonds.”  Meanwhile, here’s a historical look back at typical asset allocation strategies.

People Move Around Less As Cost Of Housing Rises

Migration within the United States has been declining since the 1970s, and especially during the 2000s.  Picking up and moving to a different state is about half as common now as it was from 1948 to 1971…There is always a tendency with stories like this to assume it has something to do with the people themselves, a change in character: ‘People today are less willing to take risks,’ or something like that…My guess — but let me be clear that I don’t really know — is that it has something to do with employment practices.”  Meanwhile, the Labor Department’s consumer expenditure survey report reveals that for most Americans, housing costs are a major burden on their budgets: “The bottom 20% in terms of income directed 39.6% of their spending to housing…and 16% to food.  For the top 20%, 30.6% of their spending went to housing and 11.4% went to food.  On average, 33.1% of all consumers’ spending went to housing costs while 12.8% went to food.  (Americans paying more than 30% of their overall income on housing ‘are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care,’ according to the Department of Housing and Urban Development.)”

China

“China’s government plans to take 6 million older, polluting vehicles off the road this year in an effort to revive stalled progress toward cleaning up smog-choked cities.  The plan also calls for filling stations in Beijing, Shanghai and other major cities to switch to selling only the cleanest grades of gasoline and diesel, according to a Cabinet statement issued Monday.”  To help put 6 million vehicles in perspective: “China has about 240 million vehicles on the road, and half are passenger cars.”  Meanwhile, “China’s eastern city of Hangzhou is cracking down on graft in the healthcare sector.”  Supposedly, an internal memo “named Britain’s AstraZeneca Plc, U.S.-based Eli Lilly and Co and Denmark’s Novo Nordisk A/S as examples of drugmakers suspected of making kickbacks.”

USA: U.S. Broadens Hunt For Tax Evaders(Alt)

“The hunt for money hidden in Swiss bank accounts by U.S. citizens has become a global chase, with prosecutors tracing records to Singapore, the Cook Islands and elsewhere as U.S. authorities increase the pressure on Swiss lenders to turn over the evidence.”

EU: Krugman Attacks 2% Inflation Target At ECB Conference

Sounds like It was just absolute mayhem at the ECB conference.

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