Over the past 3 years, John and Jane Q have acquainted themselves -belatedly - with the Fixed Income Market. Three decades into the great disinflation (culminating, as usual, with a frightening deflation scare) the volatility of stocks proved too much for Boomer hearts. Long term game plans of equity and real estate gains systematically rolling into beach communities and 6% coupons ran into trouble with the credit super cycle left hook. As Mike Tyson said, "Everyone's got a game plan til you get hit."
The $100T (plus about another 650T in derivatives) Fixed Income market is dominated by the US, although its share has decreased from over 44% to roughly 33% over the last decade. According to SIFMA, that chunk breaks down to 9.2T* in Govies, 3T in Munis, 2.4T in Agonies, 7.7T in Corps, 8.3T in Mtges and 2T in ABS.(*the Gov number is often quoted about 5T higher when SocSec and inter-gov transfers [fed] are included) Somewhere in this principle and interest mulligatawny floats the ort known as the Barclays I-Shares 20+ Treasury Bond ETF, symbol TLT. The "market cap" is roughly 3B. Never mind that this thing does not even garner a mention in any but the most recent edition of Sydney Homer's History of Interest Rates, when one hears "bonds" in financial media there is a 90% chance this is what is being discussed. The lagging performance to other above mentioned sectors over the past several years is conveniently overlooked.
The normalization of capital markets and confidence of common investors is a welcome, albeit fragile, characteristic of the last 4-5 months. The siren's call of low volatility and tight spreads is pulling boomer portfolios off the mast and into rockier waters. This is a good thing... until its not. We will not know if "Financial System 2.0" is fragile or robust until it bumps into something of magnitude all by its lonesome. This potential event is still off on the horizon at best. One more thing, that song the Siren's are singing? It's called The Great Rotation.