Don’t Look Now, But TINA Has an Alternative

Would you rather buy a risk-free long-term Treasury bond yielding more than 3.5% or take your chances in the stock market? The jury is apparently still out among investors, but at least they’re debating the matter — as has rarely been the case in the post-financial crisis era.

Consider how the investment landscape has changed. In the 13 years through 2021, many investors saw stocks as the only viable option. Persistently loose monetary policy meant that the S&P 500 Index returned 16% a year, crushing the 2.5% total return on a portfolio of Treasuries and the 6.3% annual return on investment-grade corporate debt. Investors would have been forgiven for forgetting about the risks inherent to stocks because the outperformance was also remarkably consistent during that period. That gave rise to the prevalence of the “there is no alternative” — or TINA — motto in US equity markets.

The market is now shifting in ways that many traders haven’t experienced in their professional lives. Federal Reserve Chair Jerome Powell has pledged to keep interest rates high for an extended period to fight the worst inflation in 40 years, meaning companies’ financing costs should remain high and bonds can suddenly hold their own as long-term strategies.