Insurance, Investments and Group Benefits

Global stock market volatility accelerated in recent days on renewed global economic weakness concerns. Continued economic and stock market weakness in China has received much of the blame for the recent volatility. Last week’s devaluation of the Chinese renminbi against the U.S. dollar was an attempt by the Chinese government to boost exports, but may also signal an economy that is weaker than official reports indicate.

The old proverb “may you live in interesting times” certainly applies to the bond market these days. It has been an extremely volatile year so far, with Government of Canada 10yr bond yields dropping from 1.80% at the start of the year to a low of 1.24% in February. But since then they’ve bounced right back up to around where they started!

Some of my fellow blog writers have previously commented on the benefits of downside protection through the teams’ value oriented approach to investing. For example, Nessim Mansoor wrote about Rule #1 and Gaelen Morphet wrote about The Asymmetrical Nature of Risk and Return. Today, I’d like to look at it from an asset allocation point of view.