A sea change is under way in markets

IN MY 53 years in the investment world, I’ve seen a number of economic cycles, pendulum swings, bubbles and crashes, but I remember only two real sea changes. I think we may be in the midst of a third one today.

The first occurred in the 1970s with the creation of high-yield bonds. Prudent bond investing had previously consisted of buying only presumedly safe investment-grade bonds. But investment managers could now prudently buy bonds of almost any quality as long as they were adequately compensated for the attendant risk.

This reflected a new investor mentality. Now risk wasn’t necessarily avoided, but rather considered relative to return and hopefully borne intelligently.