When we talk about "duration," most people think of a clock—how long a movie lasts or how long until a cake is done baking. In the financial world, "duration" is usually a term reserved for bonds, measuring how sensitive they are to changes in interest rates.
But lately, I have been watching a different kind of duration. It’s a risk that isn’t just hitting government or corporate bonds. It’s hitting stuff like Tech stocks and Bitcoin.
What is Duration Risk, Really?
Think of duration like a seesaw. On one side, you have interest rates; on the other, you have the value of your investment. When interest rates go up, the value of an investment that pays you far in the future tends to go down.
The St. Louis Fed highlighted something called the "Term Premium" in May, 2025. In plain English, this is the extra "insurance" investors demand for locking their money up for a long time when the future feels uncertain.
Lately, that "uncertainty insurance" has become more expensive. And when it does, it acts like gravity for any asset that promises big wins years down the road.
Why I've Been Looking at Tech and Bitcoin
You might wonder: “What does a 10-year Treasury bond have to do with my Bitcoin or my Nvidia stock?” Actually, quite a bit.
- Technology Stocks: Many tech companies are valued based on the massive profits they hope to make five or ten years from now.
- Bitcoin: Since it doesn't pay a dividend or "rent," its value is based entirely on future expectations.
When the "Term Premium" rises, investors start saying, "If I'm going to wait ten years for a payoff, I need a much bigger discount today." This is why we’ve seen so much "Investment Ghosting"—where prices drop even when the company itself is doing okay. It’s not about the company; it’s about the math of waiting.
Why We’ve Been "Underweight"
At Copper Beech, our goal is intentionality. We want your portfolio to feel like a well-built home—sturdy enough to handle a storm.
Because we saw this "duration gravity" picking up speed, we’ve been underweight in the Technology sector for almost a year. We aren't "anti-tech", we are simply protective of your well-being. When the math suggests that the "waiting period" is getting riskier, we prefer to step back and look for more clarity.
Keeping Your Balance
It’s natural to feel uncertain when the headlines focus on the latest crypto crash or tech slide. But remember:
- You’re not alone: This is a technical shift in how the whole market prices risk.
- It’s about purpose: We don’t chase "more money" at the expense of your peace of mind.
- Legacy matters: Protecting what you’ve built is just as important as growing it.
The Next Step: Do you know how much "duration risk" is currently sitting in your portfolio? It might be higher than you think. If you’re feeling a bit of "market vertigo," let’s have a conversation. Reach out to us today to review your current holdings and make sure they still align with your long-term legacy.