Originally Posted by samclem
When I set my AA it was based on the existing free market (independent buyers and sellers trying to maximize their gain in conjunction with their willingness to assume risk). There was no policy by the Fed to artificially hold interest rates down. When they change that policy and get their thumb off the scale, I'll increase my bond holdings.
It makes sense to respond if/when underlying conditions are changed.
While I agree with this "in theory", both government and quasi-government actors have been putzing with the free market since the 80s at least, keeping spending higher and taxes lower, manipulating rates, creating agencies and backstopping economic activity in banking and real estate, keeping a blind regulatory eye on same, etc., mostly in an effort to prime the pump and avoid making difficult choices.
None of this is all that secretive, so buyers/sellers can still make a judgement based on about as much info as ever...
Having said that, the long bull market in bonds since the 80s will definitely end, but the more actionable item is to expect lower returns going forward, and adjust accordingly.