What Happens After The Bond Bull Market?

The 35 year bull market in bonds has seen rates on the U.S 10 year treasury fall from 15.32% in September, 1981 to a bottom of around 1.5% in July, 2016. The Federal Reserve has started to raise short term rates which will push up long term rates as well. The bond markets long bull market is finally at its end? The fall in treasury yields during the bond bull market has also corresponded with a fall in CPI inflation from 11% in September, 1981 to 1% in July, 2016. Treasury yields and CPI inflation have a fairly high degree of correlation over this time period with a correlation coefficient 0.63. If the bull market in bonds has ended, the bear market in inflation has likely ended as well. Alternative asset classes, such as commodities and gold as well as emerging markets will likely perform very well in a rising interest rate and inflationary environment. In fact, during the high inflation 70's, gold had a compound annual growth rate of 31% while S&P GSCI commodity index had a compound annual growth rate of 21%. Many of Profolio's tactical and strategic portfolios utilize alternative assets.

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

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