I posted an article on the stock/bond ratio a few days ago, discussing the likelihood of the period of safe-haven buying of bonds coming to a close and the underperformance of stocks since the middle of last year being in the process of reversing. In essence, the post asked whether we were seeing a turning point of any importance in the stock/bond ratio.
I have included an updated version of the graph of the stock/bond ratio used in the original post. (The blue line shows the stock/bond price relative, whereas the S&P 500 Index is depicted by the red line and the US 10-year Treasury Note by the green line.)
In order to gain more clarity on this issue, I engaged the help of readers by posing the poll question: "How do you see the US stock/bond ratio six months from now?" A total of 293 people participated in the poll and answered as follows:
As shown in the table, the result was a bit of everything: 29.7% of the readers preferred stocks, 39.6% preferred bonds, and the balance (30.7%) opted for a sideways pattern.
For the record, my previous conclusion was: "The stock/bond ratio may very well have some further backing and filling to do before registering an 'all clear' turning point. But let's closely watch the spreads and other risk parameters and keep an open mind about interpreting the language of the market."
I will be running more of these polls in future, not only because the results are interesting, but also to try to ascertain whether one should perhaps put a contrarian spin on the numbers. For example, does the poll result of 70.3% of readers not seeing stocks outperforming bonds constitute an overly bearish reading that should perhaps be interpreted as bullish? More polls need to be run and the results correlated with the subsequent unfolding of events before one can venture on this terrain.
I am writing this story in midair between Johannesburg and Washington, en route to an investment conference in La Jolla, San Diego - a total of 34 hours at airports and on airplanes as I am crossing 10 time zones. But it should all be well worth the effort as I will be meeting up again with business partners John Mauldin (Thoughts from the Frontline) and Rob Arnott (Research Affiliates). Appointments with a few new people also await me, notably with the likes of Paul Kedrosky (Infectious Greed), Donald Coxe and a number of other very interesting people.
Blog posts will unfortunately be rather slow until next week and, specifically, "Words from the Wise" will take a break on Sunday as I will not have access to my usual research sources.