Last month’s Asset Allocation Survey special question asked AAII members whether changes in bond yields or the Federal Reserve’s target for interest rates have a bigger impact on their allocation decisions. Just under half of all respondents (49%) said neither changes in bond yields nor the Fed’s interest rate target drives their asset allocation decisions. Many of these individual investors said they are focused on the long term, don’t own any or only have a small allocation to bonds, or believe any forthcoming rate hike will be too small to have a lasting impact. An additional 11% said that they adhere to a long-term allocation strategy instead of responding to short-term events. About 12% said that changes in monetary policy have a bigger impact. Another 11% of respondents said that both monetary policy and changes bond yields influence their allocation decisions.
Here is a sampling of the responses:
- “A quarter of a one percent increase should ultimately have little effect.”
- “Not yet. Rates will need to go much higher.”
- “No. If bond yields go up, I would still only have a small allocation to bonds.”
- “Don’t like bonds here at all. Don’t own any and won’t get any.”
- “I will not change my allocation because I am a long-term investor and seldom change my allocations.”
- “Changes in bond yields have a larger impact than Federal Reserve targets because they have a direct impact on my returns.”
Want to weigh in? Take the survey yourself and see results online at: http://www.aaii.com/assetallocationsurvey.
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