Is the "great derisking" over?

The strong performance in equities over the last few months suggests that the great derisking of the last five years may be over. Of course, the stock market has increased significantly since the low of 2009, but we may be entering a new phase with bond yields reaching lows and starting to turn-around. 

Another phrase that can be used could be the "Great Rotation". Money is moving from bonds to stocks. Now this is not something new, but there seems to have been an increase in the pace of flows and performance differences. We should expect equities to do better in a post crisis environment. Since March 1, 2009, the S&P 500 (SPY) has increased about 120% while the long bond TLT has increased by about 32.5 percent for a differential of 88 percent over this period. The annualized difference is 22.28% versus 7.41%. Bonds out performed stocks over the last two years by almost double or 18 percent. In the last year, stocks beat bonds by 10%. Bonds were the place to be in 2011, bu the switch is on for equities.

We seem to be moving to a new phase of risk-taking.