It has been sliding relentlessly for almost two years, a warning signal that underlying deflationary forces may be tightening their grip on the US economy.
Given this extraordinary backdrop, the violent spike in US and global bonds yields over the last four trading days is extremely odd. It is rare for AAA-rated safe-haven debt to fall out of favour at the same time as stock markets, and few explanations on offer make sense.
We can all agree that oxygen is thinning as we enter the final phase of the economic cycle after 86 months of expansion. The MSCI world index of global equities has risen to a forward price-to-earnings ratio of 17, significantly higher than on the cusp of the Lehman crisis.
Fed governor Lael Brainard clearly agrees. Far from capitulating to the hawks - as many expected - her speech on Monday night warned that:
"Business investment has been falling for the last three quarters, and now the housing market is softening too."DYI Comments: Take away prosperity (what little there is) world bond and stock markets will come tumbling down. Once the next recession hits the U.S. stock market will decline over many months with the very real potential from peak to trough 45% - 60%!
DYI
No comments:
Post a Comment