Markets are heading for an inflation scare, says James Mackintosh in The Wall Street Journal. Until recently the “dominant” assumption was that the US was on track for a short-term jump in inflation, but that the US Federal Reserve would step in with interest rate hikes if things got too heated. Yet a majority of central-bank policymakers say that they intend to keep interest rates pinned close to zero until 2024, even as the US economy begins to boom. The Fed just doesn’t care as much about fighting inflation as it used to. When markets wake up, expect yields on long-dated Treasury bonds to spike.
Ten-year Treasury yields recently broke through the 1.7% mark, their highest level since the pandemic began. Still, that should be kept in perspective: the ten-year yield was trading above 3% as recently as 2018. Higher bond yields make stocks a less appealing investment. It’s enough to make you nostalgic for the “bond vigilantes” of the 1980s, says Randall Forsyth in Barron’s. Back in the days when “this band ruled the markets”, they had investors and governments quaking in their boots. In October 1987 a sudden spike in long-dated Treasury yields “collided with a richly valued market”, sending the Dow Jones plunging 22% in a single day.
Fed chair Jerome Powell continues to insist that only a “disorderly” rise in Treasury yields would spur the Fed into action, says Cormac Mullen on Bloomberg.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Bond traders see that as a “green light to test his resolve” and now talk of the ten-year yield hitting 2%, which would probably be enough to threaten stock prices. This back and forth between the Fed and the bond market has the “ominous” feeling of a “car crash in slow motion”.
-
MoneyWeek experts' best investments for the next 25 yearsMoneyWeek's experts predict the best investments for the next quarter-century. Tips range from defence and agriculture to Vietnam and Jardine Matheson
-
How to navigate the ups and downs of investment marketsMax King has spent over 40 years managing a fund and investing privately. Here are the key lessons he has learnt
-
MoneyWeek experts pick the best investments for the next 25 years
MoneyWeek's experts predict the best investments for the next quarter-century. Tips range from defence and agriculture to Vietnam and Jardine Matheson
-
How to navigate the ups and downs of investment markets
Max King has spent over 40 years managing a fund and investing privately. Here are the key lessons he has learnt
-
MoneyWeek's best calls of the last 25 years – the key trends we got rightFrom the early days of the gold bull market and the credit crunch to the advent of populism and post-Covid inflation, MoneyWeek has made some excellent calls
-
'How I brought MoneyWeek to the masses'Launching MoneyWeek gave ordinary investors information – and hence power, says Merryn Somerset Webb
-
'Why I launched MoneyWeek'Inspired by The Week and uninspired by the financial press, Jolyon Connell decided it was time for a new venture. That's where MoneyWeek came in
-
'My predictions for the next 25 years'Opinion What will the world look like when MoneyWeek celebrates its 50th birthday? Matthew Lynn shares his predictions
-
How have central banks evolved in the last century – and are they still fit for purpose?The rise to power and dominance of the central banks has been a key theme in MoneyWeek in its 25 years. Has their rule been benign?
-
What MoneyWeek has learnt in the last 25 yearsFinancial markets have suffered two huge bear markets and a pandemic since MoneyWeek launched. Alex Rankine reviews key trends and lessons from a turbulent time
