The grand sum of $1.4 trillion is a remarkably large number, no matter how you slice it. It's so large that it can single-handedly impact the direction of the stock market [1]. And thanks to recent events, it is a number you should be thinking about.
That huge sum of the money is the amount that has been shifted from stock funds to bond [2] funds during the past five years. It's a fairly historic shift, but may likely have run its course. History tells us so.
Over the past century, investors have poured into bonds [2] during periods of severe economic crises that were often associated with higher inflation [3] and higher interest rates. The most recent bond rally, back in the 1970s, was a perfect example. A lengthy period of stagflation pushed rates toward (and eventually past) the double-digit mark on the heels of anemic economic growth and rising inflation. Many investors came to the same conclusion: who would want to own stocks when a risk-free bond can deliver 7%, 8% or even 10% annualized gains? (more)
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