Asset Class Cycles
Each asset class reacts differently to different points in the economic cycle. Stocks typically do well when corporate earnings are strong and the markets are expanding. Yet, under these conditions, the bond market is likely to do worse. On the other hand, when interest rates rise, the bond market is prone to do well, but stock values will probably drop. Although a well-balanced portfolio may help spread the risk during market fluctuations, it does not assure a profit or protect against loss in a down market.