There are two important conclusions about the historical relationship of stock vs. bond returns:
- The current stocks vs. bonds performance differential, over both very short and very long time periods, is at or near historical extremes in every timeframe we examined. This suggests that we are at the threshold of a major (but temporary) market anomaly.
- Historically, periods when bonds have outperformed stocks over very long timeframes have proven to be very opportune times to shift out of fixed income assets and into equities.
