Markets all over the world are dropping after yesterday's sell-off in US equity markets. A correction has been long overdue. Look at how far prices have gone ahead of their 200-day moving average. That said, is it time to cash out and put that money in bonds in stead, especially since the 10-year is giving interest just above 3%?
While the 3% on the 10-year does look attractive compared to anything we've seen post the financial crisis in '08, it's hardly attractive compared to the returns on equity. Why trade a stock that gives you a return on equity of around 6-10% for a bond that only gives you 3%?
I'll be looking at bonds more closely when we're closing in on 5%. Seems pretty far away but as long as oil prices don't collapse, i think there's a good chance we could see this happening around 2020.
I like to buy my shares when the VIX is elevated but even after yesterday's sell-off, it hasn't hit my buy area. So i'm going to hold on for now. A few more drops like last night and i'll be ready to dip my toes in. I think the catalyst could be tonight's CPI report. The market is expecting 0.2% and if we see anything like 0.4% or higher, the market will be spooked. Do keep a lookout!
