The great inertia of portfolio choices and its implications

We look at the change, in the United States and in the euro zone, in portfolio structure (between money and short-term securities, bonds, equities and real estate). Despite the drastic movements in interest rates and in money creation by central banks, and despite the sharp increase in wealth, the portfolio structure between these different asset classes has remained fairly stable over the long term. This justifies the theory of portfolio rebalancing: if the money supply increases rapidly, the value of other asset classes must also increase rapidly if the proportions of the various assets in total wealth are to remain stable in the medium term .