2024

Time for another entry in my annual list of things I'd like to see happen next year.  But first, let's see how this year stacked up to last year's list, with comments in ALL CAPS:

A rising stock and bond market.

STOCKS UP NEARLY 25%, BUT  BONDS FLAT.

That Vladimir Putin is purged as a leader.  Any mysterious and/or violent way is acceptable.

IT WAS A BIG ASK.

Newly remodeled bathrooms in my house.

100%

Me attending a major sporting event.

DOES A KANSAS BASKETBALL, NOTRE DAME FOOTBALL, OR INDY CAR RACE COUNT?

Elon Musk leaves Twitter, or I leave Twitter for another similar service.

NO BUT PROGRESS HAS BEEN MADE.

Drought relief for the western U.S.

NOT REALLY.

Me getting a golfing hole-in-one or eagle.

NOPE.

MAGA-death, and a crop of moderate presidential candidates for 2024 who aren't aged 70s or 80s.

UNFORTUNATELY, LOST GROUND HERE.

More acceptance and usage of plant-based proteins.

I SUPPOSE YES, BUT NOT AT ALL WIDESPREAD.

And now, my new annual list of things I'd like to see happen next year:

The demise of the MAGA movement via defeat of their candidates in the 2024 elections (repeat).

Streaming service mergers and resulting price decreases.

Downside my residence -- or in the alternative, have my trailer trash neighbors relocate.

Finally get my Real ID driver's license.

Delegitimization of the LIV golf tour.

Consistently avoid working on Mondays and/or Fridays.

More pay-at-the-table restaurants.

A new technology device or service I want but don't have

2023

I promised to be less optimistic in my last annual list of things I'd like to see happen next year.  For the most part, that turned out to be a good idea.  Let's review the 2021 list, with comments in ALL CAPS:

More mandates and life complications for the unvaxxed, making more of them get vaxxed.

I SUPPOSE MORE GOT VAXXED, BUT NOT FOR INVOLUNTARY REASONS

Cryptocurrency regulations.

CLOSE BUT DIDN'T HAPPEN, BUT IT'S A LOT MORE LIKELY NOW THAT BIGSHOTS LOST BIG MONEY IN THE BANKRUPTCY OF FTX.

Prosecutions and convictions of Trump administration / organization officials who had roles in the 1/6/2021 insurrection.

CALLING THIS A YES, BECAUSE ALTHOUGH IT DIDN'T HAPPEN YET FOR ADMIN FOLKS, IT DID FOR MANY OTHER INDIVIDUALS.

A Winter Olympics that actually happens.

CHECK.  BUT IT WAS SORTA BORING.

An executive order, at the least, to loosen federal rules on cannabis.

YES THIS DID HAPPEN, BUT IT'S ONLY A PYRRHIC VICTORY WITHOUT ACUTAL LEGISLATIVE ACTION.

A top-tier Minnesota Vikings football team.

12-3 AS I WRITE THIS, SO I GUESS IT'S A YES?

A loss of market cap and credibility for Facebook/Meta.

A GIANT YES.

Me playing golf at a famous course / resort.

NO.

A decline in residential home buying.

ANOTHER GIANT YES, THANKS TO HIGHER INTEREST RATES.

A repeat from 2020 – me traveling to the final four U.S. states in which I’ve never set foot.

75% YES SINCE I GOT TO 3 OF THE 4.  ONLY ALASKA LEFT NOW.

Now for my new annual list of things I'd like to see happen next year.

A rising stock and bond market.

That Vladimir Putin is purged as a leader.  Any mysterious and/or violent way is acceptable.

Newly remodeled bathrooms in my house.

Me attending a major sporting event.

Elon Musk leaves Twitter, or I leave Twitter for another similar service.

Drought relief for the western U.S.

Me getting a golfing hole-in-one or eagle.

MAGA-death, and a crop of moderate presidential candidates for 2024 who aren't aged 70s or 80s.

More acceptance and usage of plant-based proteins.

The Investment Wallflower

Nearly every conversation about the investment marketplace focuses on the stock market.  From the media to financial advisors to investors, the bond market has long been an overlooked wallflower at the proverbial investment dance, even though it has experienced exceptional risk-adjusted returns over many years.

However, the bond market is currently the one that deserves attention.  After a decades-long run of falling interest rates (and thus bond prices rising), bond yields recently have risen sharply, negatively impacting those portfolios with significant exposure to what many consider a ‘safe’ investment.

Generally speaking, the bond market works like this:  As demand rises for less risky investments, bond prices go up.  If you are a bond issuer, such as a government or a corporation, heavy demand means you can get away with paying a lower yield.  Borrowing gets cheaper, with a hoped-for side effect of economic stimulation.

After the 2008 financial panic, bond prices rose to a great degree because the U.S. Federal Reserve started buying billions of dollars of government-issued debt.  Without this central bank action, demand surely would fall, and issuers would be forced to pay higher rates, potentially stifling an economic recovery.

In the past several months, uncertainty about when the Fed might taper its purchases caused a broad selloff in bonds.  Yields climbed rapidly, and fixed income investors suffered losses.  Note that nothing actually changed; rather, the bond market reacted in a volatile way to the mere perception of a change.

No one knows exactly when the Fed will decrease its government bond purchases, but fortunately, we don’t have to know to have a good investment outcome.  A successful investment portfolio doesn’t come from market timing – it comes from a low-cost, risk-appropriate mix of stocks and bonds based on time horizon, with disciplined rebalancing to that mix as necessary.

Managing bond risk is no different than managing stock risk, in the sense that emotion-free decision-making is critical.  The bond market wallflower may suddenly want more attention, but that doesn’t mean you have to change how you dance.