Originally Posted by FinanceDude
2)If the fed cuts rates, bonds will do well, as folks that own bonds will get appreciation, as new debt issued will have lower yields, making the higher yielding bonds more valuable.
With interest rates already very low by historical standards I wouldn't count on much in the way of capital gains from a bond fund. I think that over time, you should only count on making somewhere around the coupon rate...
While I understand the AA theory behind owning bonds, it just doesn't seem like there's much potential reward in them. I personally tend more towards dividend oriented stocks for the income portion of my portfolio.
Although we're not supposed to be market timers, it seems like a no-brainer to lighten up on domestic equities if you believe that one party will control both legislative and executive branches of government after 2008. Regardless of one's political affiliation it seems clear from the last 20 years of history that neither party can really be trusted with that much power without inflicting terrible consequences on the economy.