Rocaton explores how investors should respond when traditional asset classes all appear unattractive, emphasizing that discomfort is often a feature of markets rather than a signal to disengage. The paper challenges the idea of waiting for “perfect” opportunities, arguing that staying invested, even in imperfect conditions, may be more practical than holding excess cash that guarantees a 0% real return.
What To Do When Nothing Looks Attractive?
Rocaton
Research
7 Pages
Key Takeaways
Cash Drag Reality: Holding cash at 0% yield while inflation runs near 2–3% can erode purchasing power by roughly 2% annually, creating a silent but persistent loss.
Diversification Still Matters: Even when expected returns compress, diversified portfolios historically reduce drawdowns by 30–50% compared to concentrated exposures during stressed periods.
Forward Returns Compression: Lower starting yields and elevated valuations imply future returns may fall 2–4% below long-term averages across major asset classes.
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