Majority of Investors Not Changing Allocation Due to Treasury Yield Decline

March’s Asset Allocation Survey special question asked AAII members what impact February’s decline in treasury yields had on their allocation decisions. Over half (55%) of the responses we received said that February’s decline in Treasury yields had no effect on their allocation decisions. Conversely, 17% of respondents stated that they were reducing or reconsidering their allocation to bonds and bond indexes in light of declining yields. Many within this group stated that they were investing in equity index funds and/or short-term bond funds in lieu of Treasury holdings. 

Other responses included increasing allocation to equities (15% of respondents) and increasing cash holdings (13% of respondents). Their rationale included a greater number of bargain purchase opportunities and a desire to increase allocation to dividend-paying stocks. Additionally, many respondents from this survey said that the market’s volatility and declining yields have pushed them to take a more conservative approach.  

Here is a sampling of the responses: 

• “It doesn’t make sense to invest in bonds when the yield is less than 1% on 10-year bonds. I am moving either to cash or stock funds to ride out the trend.” 
• “The market moved too fast for me to change anything. However, I am considering taking advantage of the rebound.” 
• “None, other than to reinforce my belief that bonds are a poor investment at this time.” 
• “Makes me closely monitor my sizable investment in ‘ultra-short-term’ bond funds. If they start to decline in price, I’ll sell them and go to cash.” 
• “Not too much, but the stock market tanking has made me want to buy the dip at some point closer to the bottom.”