Speaking with experienced financial advisors in recent weeks, one finds they are having a few common conversations with clients, many of whom have excellent memories.

Clients who have worked with advisors for several decades and are approaching retirement generally are upbeat about the economy. Some are discovering that in a tight labor market they can work a few more years than they had expected.

Advisors who had the guts to push clients to the outer limits of their risk-tolerance levels in 2008 and 2009 are being rewarded these days with a surfeit of satisfied clients.

The question some of these clients are starting to ask is whether they should take some chips off the table. Most advisors say these clients are hardly unreasonable.

The answer, of course, varies from client to client. Assuming advisors have been using some rules-based form of rebalancing, their portfolios should not have gotten heavily overweighted in stocks.

It is generally accepted that equity-oriented portfolios are the best performers over the long term. Stocks have spent most of 2018 fluctuating between 16 and 18 times earnings, expensive but not a bubble by any traditional yardstick.

But the phenomenon that existed for much of the post-crisis era known as TINA (There Is No Alternative) to stocks no longer exists. At 2.9% in late August, the 10-year Treasury now yields 110 basis points more than the 1.8% in dividends thrown off by the S&P 500.

Corporate bonds yield significantly more than Treasurys. Unfortunately for clients seeking to de-risk their portfolios, the bond market has been a tough place over the last two years and many leading fixed-income experts don’t like corporates.

It’s far from clear that the rate-hiking cycle is over. So these clients shouldn’t stray too far out on the yield and risk spectrum of the bond market.

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