Category: Bonds

In markets, we often hear of these precise levels, beyond which everything is said to unravel.  The so-called “breaking point.” Their allure is undeniable. If such a point existed, one could fully prepare for it in advance, exiting unscathed before the stampede of the masses. Over the past few years, the most popular “breaking points” have […]

The Next 7 Years

What returns are you expecting from stocks and bonds over the next 7 years? This is a question that GMO (one of the largest and most respected asset managers) attempts to answer on a quarterly basis. Their most recent forecast was downright depressing: -2.2% per year from large cap U.S. stocks and +1.9% per year […]

Duration giveth, and duration taketh away. For much of the past 35 years, while interest rates were in a secular decline, duration (a measure of a bond’s sensitivity to changes in interest rates) was the best friend of bond investors. In 2018, it has become their worst enemy. At one end of the spectrum, you […]

  • Posted in Bonds, Markets
  • Comments Off on Do Bond Investors Have to Take Duration Risk?

Interest rates are on the rise, at their highest levels in over 4 years. What is that telling us, if anything, about growth and inflation? Let’s take a look… While you often hear commentators suggesting there is a strong relationship between bond yields and the real economy, the evidence seems to be lacking. Since 1930, […]

  • Posted in Bonds, Economy, Inflation
  • Comments Off on What Is the Relationship Between Interest Rates, Growth and Inflation?

With the yield curve hitting its flattest level of the expansion last week, many are wondering what impact that will have on the stock market. Data Sources for all tables herein: NBER, FRED, Bloomberg. Using monthly data. The yield curve is a leading indicator of the economy, but the stock market is one as well. […]

  • Posted in Bonds, Equities
  • Comments Off on The Relationship Between the Yield Curve and the Stock Market