RE:RE:How to Play the Market in the Current Environment?Good points Jay
Actually the bond market aspects of this were in the "other points I could add" category in my previous post but since you brought it up...oh well...
The Executive summary...
In a scenario where inflation does decline rapidly or there is a recession forcing Central banks (the Fed) to reverse course and lower interest rates, bond prices would go up. In the early stages of such a scenario, the combination of coupon interest plus capital gains on appreciating bond prices would most likely exceed returns on the stock market by a wide margin at lower risk. This is exactly what happened in 2008/09.
This is also why in my own asset allocation I have moved from zero fixed income to around 25%.
I learned a long time ago that returns are significantly enhanced at lower risk through proper asset allocation adjustment over the economic cycle.