New thinking: Going back five years, to well before the recession, bonds win. You have to measure back 20 years to find a long-term edge for stocks, and even then it is small.
"It's definitely blown up the view that stocks always outperform over long periods," said Tony Rodriguez, head of fixed-income strategy at First American Funds in Minneapolis.
But bonds also may face headwinds in a few years. Deficit spending by the federal government may ignite inflation and drive interest rates higher, which would depress the price of bonds.
"Bonds are about to take a big hit," said Dan Deighan of Deighan Financial Advisors Inc., a firm in Melbourne, Fla., that manages more than $150 million for wealthy investors.
Stock diversification
Conventional wisdom: You should diversify your stock portfolio to protect yourself in bear markets and get the best returns in bull markets. In downturns, count heavily on "value" stocks - those considered cheap compared with historically steady earnings. To take advantage of good times, own more volatile "growth" stocks - those expected to have rapidly growing earnings.
New thinking: The dramatic stock rally since March suggests a slowdown is inevitable and that it is time to move more into value stocks. But it all depends on what type of economy emerges. Typically, the economy will grow at least for several years after a recession. But this time, Americans are hesitant to spend because of the high unemployment rate and the lasting effects of the housing bust.
A slow economic recovery could send the market into a "W" pattern - big gains followed by a second steep decline.
Experts say we should expect more volatility in the economy - a choppy recovery, not a steady upward climb. That makes any broad bets about which types of stocks that will gain the most in coming months and years an unusually dicey proposition.
Alternative investments
