- The traditional portfolio mix of 60% stocks and 40% bonds is having its worst year in a century.
- Michael Gayed says if volatility in the bond market doesn’t abate, economic activity could halt.
- He believes small-cap and medium-cap stocks will be the first to run up during a recovery.
So far this year, the S&P 500 is down by about 23%.
Traditionally, when stock-market volatility rises and prices fall, investors tilt toward bonds for safety. At least, that was the game plan for Michael Gayed, a portfolio manager at Tidal Financial Group and publisher of The Lead-Lag Report. But this year, both securities have been hit with volatility and there’s been no place to hide. The traditional portfolio mix of 60% stocks and 40% bonds is having its worst year in a century, according to Bank of America.
Normally, Gayed pivots his funds to long-duration Treasuries in risk-off periods, when investors shift to less risky assets due to shaky market conditions. This time, that strategy has been a pain point for him: his ATAC Rotation Fund (ATACX), which switches between small-caps, large-caps, emerging markets, and Treasuries based on market conditions, is down by over 31% year-to-date.
