Inflation has come down and the bias form the market is that the Fed will cut rates in September and start the process of bringing down short rates. The advantage from holding cash will decline, so the question is whether those funds in cash should move into equities or bonds.
If inflation is lower and growth is lower, the choice of seems to make sense, but the environment is not a given. Additionally, investors have to think about relative valuations. Stocks are, by some measures, expensive relative to bonds which tilts the decision in the direction of bonds. The Sharpe ratio favors bonds, yet stocks will still do well, just less well than if the equity market is cheap.
The bias seems to be in favor of bonds as the again the great diversifier; nevertheless, if the choice is expanded to alternatives choices like managed futures seem attractive. With trend-following you may be able to take advantage of adjustments in both stocks and bonds.
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