Honey, the Fed Shrunk the Equity Premium
September 5, 2023
What are the implications of higher interest rates for asset allocation? This article reviews historical patterns and forward-looking expected returns for a range of asset classes, and highlights the role of “cash-plus” liquid alternatives — overlooked beneficiaries of higher cash rates. We show that in a higher-rate world that investors haven’t seen for many years, diversification away from equities may prove to be especially valuable.
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