All assets will need to be revalued downward. Both real estate and stocks I would think will do better than bonds.
Real estate and stocks both have benefits from inflation that bonds just don't have. So, inflation is a mixed bag for real estate and stocks. On the one hand, company earnings go up (stocks) and because the rising replacement cost of building a home drives home prices up (real estate). On the other hand, rising inflation raises interest rates, which cause P/Es to fall and which make it more expensive to own real estate. Typically, the interest rate effect overwhelms the other effect, causing a large drop.
Bonds don't see any benefits from inflation. If interest rates double, then the value of bonds is cut in half. And if the Fed starts to put on the brakes, then junk bonds get hit harder than safer bonds, so they drop even further.
There is a ton of leverage out there -- people buying on margin because the market is predicted to always go up.
But I've been overly cautious this past 12 months. I perfectly nailed the pandemic sell-off (I though things were overvalued and I could see the pandemic coming). And I nailed the bottom (pure luck). But then I went back to too much cash too soon and have been gradually moving even further toward cash.
Depends on your time horizon, I suppose. I am all set for retirement, so I figured why risk it. I really enjoy looking at all that cash (though I could have 50% more if I'd only held until now). But these are crazy times, and I like having cash. Plus, I've been reading too much John Hussman on Seeking Alpha.
I am obviously NOT an investment advisor.
