Question

Julia’s investments survived the last recession and bear stock market declines because she was well diversified and was investing more heavily in bonds in the years preceding the decline. Julia cashed out of some equities and moved most of that money into corporate bonds and Treasuries. As a result, over the past four years, the bond portion of her portfolio rose over 20 percent due to low inflation and declining interest rates, which pushed up the value of her bonds. Now she thinks inflation and bond prices will rise so she is selling all her bonds and investing the proceeds into equities. But the stock market prices seem too high already, so she is hesitating. Offer your opinions about her thinking.

Answer 1

As been invested in the bonds has saved Julia from heavy loss in equities. Now, the bond markets are at boom due ot low inflation and interest rates. The stock prices in the equity market are at very high level, so it would be better for the Julia to remain invested in the Bond markets, as the boom in the bonds market is not going to abolish in foreseenable future, rather it will improve on its gains because the equity and commodiites are exusted markets and investors will do the profit booking in these markets and invest in the bonds markets. The purchases of the bonds and treasuries will raise their markets.

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