Warren Buffett rarely makes major calls on the stock or bond markets or on the relative attractiveness of different asset classes. However, he has been making more comments on the economy over the past two years and made a remarkable statement at the Fortune Most Powerful Women Summit yesterday. Mr. Buffett believes that it is now “quite clear” that stocks are more attractive than bonds and “can’t imagine anybody having bonds in their portfolio when they can own equities”. Read this article for more information.
Throughout the 1990s, mutual funds were marketed to individual investors with stellar ten and fifteen year track records made possible by the record bull market of the 1980s and 1990s. While there were a few notable interruptions, with the 1987 crash being the most obvious, most individual investors learned to “buy the dips” throughout this period. Most large capitalization companies made significant advances in earnings during these years but the expansion in earnings multiples had the effect of turbo charging returns to investors. Of course, this all culminated in the bubble of the late 1990s, but small investors remained optimistic for some time, having been trained to buy the dips for so long. Read this article for more on why investors cannot expect to hide from equity market volatility in fixed income securities, at least not without taking on other types of risk.