With the 10-year U.S. Treasury yield above five per cent and the S&P 500’s cyclically adjusted price-to-earnings ratio at about 40 times — near levels last seen around the dot-com peak — investors inclined to try to time markets may be tempted to sell equities today and buy bonds in the hopes of earning decent returns while waiting out a potential equity market correction.

Unfortunately, predicting market events isn’t a reliable investment strategy for most investors and bonds come with more risk today than they did in the period leading up to the dot-com peak. Investors are better served by developing a plan for the next downturn and adjusting their portfolio when one actually does occur.

Read: Equities market faces geopolitical volatility, questions around AI growth: report

Bonds are riskier today than in the 1999 dot-com peak when the equity risk premium was also small. Today, government bond yields could remain high or move even higher, due in part to factors like the Congressional Budget Office projecting U.S. debt held by the public will be more than 100 per cent of gross domestic product in 2026 and rise above its post-war record in coming years. The federal government hasn’t recorded a budget surplus since 2001 and inflation has exceeded the Federal Reserve’s two per cent........

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