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"A reversion of risk premiums to historical averages of 6% nominal rates (3% real rates and 3% inflation) would suggest estimated losses in portfolios with bond durations of 5 years of 25% or more," equity strategist Robert D. Boroujerdi said in a note.

Taking the other side, it depends on your time frame to make his statement be true. Lets take a retirement account where you don't expect to need that money right away. Stocks stayed flat for 10+ years on whole. They are still deemed over-valued by Shilling and others to the tune of 15% to 45%.

IF you have a bond fund, or individual bonds of five year duration, you will be back to level at the higher rate he hypothesizes in five years.

As I said, I personally prefer ST corporate funds with an average 3 year duration, but there still are arguments for keeping an allocation of bonds.

RYR Home Fool
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