In a market where "long term" means..."after lunch"...bonds may be a safe alternative to stocks and commodities...
But, for those of us with longer term memories that thinking is a little bit nuts.
Yesterday, the yada yada was that stocks were falling because of the FEDs new found inflation fears...and higher rates would mean lower demand for commodities...ergo, bonds and cash were the investments "du jour."
In the longer term, FED rate hikes will raise the future yeild on bonds...thus lowering the value of currently priced bonds... Which means that current bonds must decline in price to come up with the now higher yield requirements.
So, stocks and commodities lose now...bonds lose later.
The notion that the FED is "doing somthing" about inflation; and therefore bonds are a worthy alternative...is nice...but, only for newbies in the bond market, not current holders.
In truth, the real issue is how far behind the curve is the FED?
AND can the dollar be saved by higher rates...or is it already too late?
The entire affair turns on your ultimate view of the dollar...long term and short term.
In the 1970's, the dollar plunged and gold rose...but the world economy was not ready for a new reserve currency...so, the dollar was painfully rehabilitated over a decade of higher rates.
Today, there are ALTERNATIVES TO THE DOLLAR... The Euro and the Yen for sure...and possibily in time the Chinese currency. There are also baskets of commodities and ETFs available to hedge currency risks that were not readily available in the 1970's.
SO, THE DOLLAR IS NOT THE ONLY GAME IN TOWN...AND THAT COULD MAKE ALL THE DIFFERENCE IN THE WORLD.
HIGER RATES BY THE FED MAY NOT BE THE CURE ALL FOR THE DOLLAR THIS TIME.
