Stocks, bonds, and real estate are all in the same boat because their values have been propped up by decades of falling interest rates. If rates rose by just 3%, to levels last seen in 2008, the discount math says all these assets will fall by large double digit percentages. Stated another way, I expect the correlations between asset performances to be higher in the future than they were in the past, because their valuations are all tied more to interest rates than ever before.
Even gold is propped up by the lack of return available on other assets. There was a time in living memory when one could FIRE just on the coupons from long-term treasuries. If that time ever returned, people would raid their safes.
If rates stay locked in a low disinflationary spiral, Japan-style, then all assets might do OK. If rates rise even a little bit in the 2020s, all asset classes will be demolished and we'll probably have a second financial crisis.
Policy makers know they have to keep a lid on the velocity of money (inflation) or face severe consequences. Thanks to demographics, ex-US dollar demand, and higher taxes/tariffs, I think they are and will continue to engineer a soft landing, as Japan did with its lost decades. If inflation rises, the Fed could first of all taper it's $120,000,000,000 per month in asset purchases. Then, if that somehow doesn't work, they could start selling assets from their multi-trillion dollar balance sheet. Raising rates will be a last resort, and I'd not be surprised if we're hanging out around 2% ten years from now.
So if the future looks like either bubbles in all assets or lost decades, and if there are no longer any negative-correlated asset classes, how do retirees maintain a 40 or 50 year portfolio with a 4% WR?
One answer is to aggressively ride the bubbles up and reduce one's WR to the 3% range. Another is to use inherently negative-correlation tools: options. I will pursue both objectives via a 90+% stock portfolio protected by put options or, more likely, the collar strategy. Only by hedging can we obtain 100% certainty about surviving SORR events. A fat treasury allocation with negative real yields and massive convexity risk does not contribute to portfolio safety any more.
Market participants can see the Fed has their back against the wall, and so they are inflating asset bubbles in stocks, bonds, and real estate. After the tech bubble and housing bubble 1.0, there has been increasing pressure on the Fed to do something about asset bubbles, because when these pop it can affect the Fed's maximum employment objective. So the Fed faces two risks to its mandate: asset bubbles if rates are left too low for too long, and asset price collapses if rates rise too much.
The path between these risks is to constantly threaten and talk about small, mostly symbolic quarter point rate increases to slow the development of the bubbles (note the Fed's recent emphasis on more communication). Rates may rise a small amount between now and the next recession, but not by 2% or anything dramatic like that. Fears about these minor increases will trigger several corrections before the next recession, and these taper tantrums will be opportunities to buy stock and cash out one's hedges. Raising and lowering one's hedges is the new rebalancing.