Buy Equities, Huskies, Buy!!
At an index value of 1200 the S&P 500 has a trailing twelve-month price-index ratio of 16--an earnings yield of 6.25% and a dividend yield of 2.5%.
Buy seven-year inflation-indexed Treasuries and hold them to maturity and in 2018 you are down 1.4%.
Buy the S&P 500, reinvest the dividends, and assume that retained earnings get transformed into value with a 20% haircut, and in seven years you are up 47% plus or minus whatever the real change in the relative valuation of corporate America is over the next seven years.
Not that I would recommend a portfolio with a beta of greater than two, mind you--things could get very sticky over the next three years. And the fact that U.S. equities look to be a buy now doesn't mean that they won't be even more of a buy in a year--although the fact that the Bernanke anti-deflation put does operate at some level puts limits on how low we can go.
But I can't see many scenario in which the S&P 500 declines in relative value by enough to outweigh that 47% bump from the real earnings that the S&P 500 companies will make over the next seven years.
It's very strange to finally be more optimistic than the market...