Bonds Are Finally Fair Value — What I’m Buying Now

Bond yields have reached fair value at mid-5%, marking the end of a six-year period where bonds were consistently overpriced. This adjustment reflects persistent inflation and a resilient US economy, which continue to drive nominal GDP growth. The Federal Reserve now faces a significant credibility challenge, as political pressures and a shift toward decentralized decision-making among its 12 voting members complicate policy predictability. Meanwhile, the equity market remains bifurcated, with AI-related stocks decoupling from the broader economy. The rise of retail traders, empowered by fractional share access and zero-day options, has further transformed market dynamics, favoring short-term speculation over traditional long-term valuation models. While debt monetization remains a long-term concern, current inflationary pressures constrain governments from aggressive debt relief, leaving the market to navigate a complex environment where traditional 60-40 portfolio strategies require recalibration toward higher cash and bond allocations.