Stay defensive from now

What lines ahead of us for the interest rate ? Concerns the Fed may curtail the bond buying, known as QE, helped push the yield on the 10-year Treasury note as high as 2.61 percent from as low as 1.63 percent in May. The carry trade effect caused the market turmoils in both US and Asian market last week as Chinese market hit 4-year low. And over the weekend, William Dudley, president of the Federal reserve bank of NY came out to clarify what Ben has said last week. However, we all know, Bernanke really meant what he said, the tapering of bond purchase will become reality in the coming 6-12 months. He just spoke in a way to test the market and found out only 5% correction happened and became stabilized with assistance from Central bank of China. So in short, a risk averse investors do not want to allocate to bonds in your 401k starting from now if you have not done so previously.