It has been interesting to discuss, referring here specifically to the past decade, the prospects for U.S. stocks as an asset class in one’s portfolio during conversations about optimal portfolio allocation.
I have been a believer that a tactical allocation between cash and gold was optimal for one’s cash portion of an investment portfolio since I began advocating it during the 2004-5 time period. The cash I am referring to will be the subject of Considering Cash, Pt. 3. about fresh cash ready to be allocated to an investment, not that of Pt. 1 in which I discuss general liquidity needs.
Note: I have had numerous opinions about many investment assets (e.g. my general bullishness on the 10-yr bond) during that time period, but the above comment refers to my prior thoughts on the general portfolio for one with limited assets and/or solely focused on maintaining purchasing power within this turbulent, structurally-imbalanced economic environment.
Most folks agree that we encountered a secular bull market from 1982-1999. It is hard to believe, despite declines at the beginning of the century and the decline in ’08, that a secular bull has begun. The economic issue of fixing the structural problems in the economy is, ultimately, the key issue for fueling future sustained stock price prosperity.
Many analysts might say it doesn’t matter for now, thanks to continued Fed QE fueling a stronger economy. I don’t think the economy is nearly as hot as some recently feel it is, but I do believe Fed QE provides a put on the stock market…for now.