Will Religion Hurt Your Portfolio?

The first time I went to an Unitarian Universalist Fellowship was before my son was born… so I’m guessing it was over 12 years ago.

We were there on graduation day. The seventh graders were graduating from their religious education class.

And in the prior months fourteen, twelve year olds in Silicon Valley were offered seven religions. They were offered: Christianity, Islam, Hinduism, Buddhism, Taoism, Judaism and atheism.  These by the way are the seven most followed belief systems in the world. They were educated equally on each one.

I didn’t put the above in order of popularity, because if I did then atheism would be third, as its the third most followed “belief system” in the world today.

Each of the 14 kids took their turn and stood up in front of the fellowship and said what they believed as twelve year olds.

The first student to stand and speak was a sweet 12 year old, she believed in Christianity because her mom had died the year before from stage four cancer and she believed that her mom was with God now. I forgot the words she used but the way I heard it was that she had to believe this because this was the only answer.

The next 12 student stated their choice and gave their reasons why. And all of them said the same thing, they had to believe “this religion” because it was the only answer.

They all said the same thing, this was the only answer.

The final student to go was also a 12 year girl, but this girl believed she was an atheist. Her reasoning was that this was the only choice that most made sense to her. As she couldn’t believe in a lot of what the other religions held as true.

Now here’s the thing.

These kids had been given a choice. They had been given a choice to believe what they wanted to believe and not what their parents wanted them to believe.

Isn’t that amazing?

It is to me.

Because I don’t think many people are given choices. I believe most people believe what other believe simply because that’s what others believe.

It’s not an easy transition but, I want to switch from religious beliefs to investing beliefs.

Most people believe the way to lower their “risk” is to own bonds. They believe this because it was true in the 1980’s, 1990’s and the aughts.  

They believe this in a very similar way that people believe in their religion. It’s just the way the world works.

But some believe including myself that bonds, may not be that “de-risking” asset that it was in the 80’s, 90’s, and 00’s going forward.

Some believe bonds may be the source of risk in the coming years. Below is the index of the 10-Year US Treasury Note (the most followed bond on the planet). It’s a price index so dividends are not included.

Does something strike you immediately when you look at the price chart below?

Bonds are falling in price.  

Or at least the most followed bond on the planet. The 10-Year US Treasury Note.

Here’s the thing, see that black dot on the price chart below? That’s the 10-Year life time high. And it was hit in May of 2012.

As you can see in the price chart below, the 10yr US Treasury moves in one direction for a very long time, about 35 years.

The 10 Year Treasury bottomed in 1981, which means it’s yield peaked the same year. If you look at the image below you can see that big spike, that’s 1981 with yields topping out above 15%!!!

No one knows for sure if the bottom has been put in for yields (peak in price).

We’ll have to wait for the next recession to find out. It’s because The US Fed has dropped their federal funds rate an average of 5.25% during each recession going back to 1970.

It could be different this time as a 5.25% drop in the federal funds rate today would put its rate at about -3.25%.

What’s most interesting about the above 10-Year Treasury yield chart is that the blue line has basically been falling nicely since 1981 (the trend’s been down AND consistently down).

But if you start to study the chart, you’ll notice today’s yield is at the same point or higher as it was in 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and 2017.

Below you will see that I zoomed into the 2009 to 2018 time period of the same chart, the flat red line is where the 10-year rate is at today (October 2018).

Here’s my point. 10-Year Treasury yields have never gone sideways (since 1981) this long.

So if the yield market has not bottomed (which means price is peaking) then the likelihood of the yield market bottoming is very high (again that means prices have peaked).

And this is going to potentially cause a problem for people that believe what others believe simply because others before them have believed it, which is, people buy bonds as they get older to lower their risk.

So if you are asking yourself, “RC… why are you talking about bonds again?” It’s because…

…bond yields just broke an important number. The 10-year has broken above the 3.1% yield line in the sand.

And this means old religions like “bonds mean safety” and the “60/40 stock/bond split means safety” might end up being (in hindsight) the source of risk and not the elimination of it.  

I was drawn to the Unitarian Universalist approach because they believed (and still do) that…

people should have choice. And be kind. And fight for justice. And include others.  


Religion is a very touchy topic, especially in the United States. I say this because of all the countries I’ve visited or lived in (50 in total) many countries have no-charge around religious conversations. But the US does.

So let’s be clear here. I’m cool with whatever you believe as long as it doesn’t hurt others.

AND I use religion as a metaphor because it makes a very clear point. Investment Religion might soon become very expensive.

In Your Corner,

RCPeck-Dig Signature.JPG     
RC Peck, CFP

P.S.  When was the last time you had a third party review your portfolio and approach? Are you ready? If you are not sure or you know you may not be then the easiest step is to click here to get onto my calendar.



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