If you have bonds in your portfolio today, you may be turning into an investment zombie.
Bonds have outperformed other asset classes in the past, which has many investors blindly marching along, now suffering undead yields and not questioning the sanity of a system overloaded with debt. Meanwhile, Federal Reserve Chair Janet Yellen is preaching the legitimacy and effectiveness of quantitative easing, all the while draining the life and diversification out of your portfolio.
In today's economic landscape, the contagions that are infecting investors globally are negative rates and low bond yields.
Increasing stock and bond correlation has investors mindlessly moving in lock step, assuming that what's worked in the past (a mix of 60 percent stocks and 40 percent bonds) will continue to benefit their portfolios going forward.
But the Fed doubling down on artificially low interest rates for almost a decade may have doomed the bond investor – as well as the saver and retirement investor – to a world where the rules have changed.
For those who have become wise to the changing landscape, the hunger for yield has them searching outside of U.S. Treasurys or municipal bonds. Unfortunately, this ends up contaminating their portfolios with even more equity risk and less portfolio diversification. So the contagion mutates and corrupts portfolios in a different way.