Spet0789 wrote:There is almost no chance that the returns of holding 10yr bonds over the next 30 years will resemble those returns of the last 30 years.
You might say the same for stocks and bonds.
I do wonder about holding 20 year Gilts for the forward time bond holding. In a time of low price/income gains then it can be volatility that pays 'dividends' (rebalancing back to target weights is a form of 'trading'). The convexity and actual price motions can surprise. Take post WW2 for instance when cash interest rates were continued to be kept low (0.5% levels i.e. similar to recent) whilst prior low/no inflation spiked up to 12% levels before dropping back down again to more around 5% levels by the mid 1950's and when in the 1950's interest rates were again permitted to rise back also to around 5% levels. Many might opine such a period was disastrous for long dated Gilts, but it wasn't. Yes the rewards were light, 1944 to 1955 for instance yielding 1% annualised real gains, compared to around 6% for stocks and 4% for commodities/PM. A third in each and near 4% average compared to 6% for all stock (speaking in after inflation terms).
The broader situation with rising inflation as sooner or later I expect we'll see repeat is not a smooth/linear transition but rather increasing spikes/troughs and then subsequent declining spikes/troughs ... i.e. quite volatile. During that zigzagging around so long dated gilts will also be volatile and convexity tends to see the 'good years' gains counter and more the 'bad years' losses. Maybe something like 5% inflation one year, 8% the next, then back down to 6% the next year, before then spiking to 12% and then falling back down to 7% before reducing further to 5% and things tending to flatten off thereafter. Long dated Gilts under such conditions will see considerable volatility but where when part of a portfolio and rebalanced that all compounds out to a much less overall loss than perhaps envisaged across a period when interest rates and inflation had been 'high/rising'. Or overall real gains despite "interest rates and inflation having broadly risen quite significantly".
As with some saying long dated gilts only had one way to go after 2009 when interest rates fell to 'such low levels' perhaps being surprised that such gilts gained 100% since. Predicting outcomes is notoriously difficult and more often the actual outcomes surprise many.
I suspect as a defensive asset allocation a third each 50/50 UK/US stock, gold and a 20 year Gilt combination yearly rebalanced might do relatively OK. Something like a 2.5% inflation bond (SWR) but where historically on average there was also a additional 2.5% real gain thrown in on top. Investors sell one asset to buy another and flows between each of stock/bonds/gold. I have no idea which may see the greatest inflow/rise in value over the next 12 months, stocks, bonds or gold. A equal probability bet has you stake equal £ amounts on each. Or you could guess/predict, if so I'd probably suspect stocks or gold were more inclined to do OK. I might even guess that given US great recent gains that they might relatively decline and UK stocks might do better, so in predictive terms I could perhaps opt for 50 UK stock, 25 US stock 25 gold ... as a guess/prediction. I wouldn't however bet the farm that that would do better than a equal three way split as often predictions prove to have been wrong.