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Blooming Tree Wealth Management

How Bond Yields Make the Stock Market a “TINA” Trade

On Thursday, July 29th, I held a virtual lunch webinar on behalf of Blooming Tree Wealth Management. During the talk, we discussed “speeding slower,” meaning we expect the economy to continue to move forward but at a slower pace than the first half of 2021. One of the main topics was the “TINA trade.”

TINA = there is no alternative.

TINA refers to the stock market in relation to bonds. In past generations, bonds have been a safe and useful investment tool for retirement funds. Their returns have helped stabilized portfolios and ensure predictable income streams. Unfortunately, bonds do not currently offer the same safety net they once did.

Bonds provided an alternative to stocks when rates were falling. In a rising rate environment, which is on the horizon, the value of older, lower-paying bonds decreases in value. With stocks expected to continue to rise, even at a modest pace, bonds do not appear to have as large a place in retirement portfolios.

Dividend-paying stocks are the new bonds. Over the past several decades, owning stocks has been the best buffer to fight inflation. Investing in companies that are financially stable has proven to be a functional strategy year after year.

Should you own stocks in your retirement portfolio? It’s not a question of whether to own stocks. Rather, your focus should be on the type of equities you own and how much of the portfolio that you allocate to it. Since all the easy money in the stock market has likely been made after a strong recovery to the dip in 2020, active management is required. Now is the time to revisit your investment strategy for the next year and a half. Be sure to reevaluate the fixed asset portion of your portfolio.

For more insight into what has happened in the market so far in 2021 and what is expected to come, review the LPL Mid-Year Outlook here.

Stay tuned for our next webinar to ensure you’re prepared to finish 2021 strong and start 2022 off on the right foot. Need guidance with your retirement portfolio? If so, please contact our team at Blooming Tree Wealth Management here.

Note: All entities are separate and not affiliated with LPL Financial.