Yes, bonds are finally a viable option, but for years and years, they offered scant yield plus high risk when rates finally did take off.
That didn’t stop the wealth management industry from relentlessly pushing the portfolio of 60% stocks and 40% bonds, and now we’ve seen the results.
Doing the Math
I’ve been around for a while, and this is the first time in my life where there has been a major geopolitical event without the dollar or Treasuries getting a bid. It isn’t that investors aren’t taking the Gaza situation seriously; gold is up about $150 since this started.
I suspect that investors are doing the math. Not only is our ever-expanding debt unsustainable, but also there’s doubt as to whether it can be serviced short of monetizing it.
Most people would regard the idea of swapping out Treasuries for gold as insane.
As Ken Kesey pointed out in One Flew Over the Cuckoo’s Nest, sometimes the insane is sane.
Wisdom of the Crowds
Big Money's Split Outlook on Stocks and Bonds
According to the Big Money Poll, 85% of respondents believe that the 10-year Treasury will be 5% or lower by this time next year. Additionally, 75% think that the federal-funds rate will be 5.25% or higher. Surprisingly, only 46% are betting on a recession occurring within that timeframe.
It remains to be seen if the bear steepener, or the wisdom of crowds, can provide further insight into these predictions. Perhaps a new curve-inversion clock will start ticking next year.
Blanchflower's Revealing Research
The recent interview with David Blanchflower published by 's was both important and insightful. His research at Dartmouth College focuses on adverse childhood experiences and their impact on the labor market and generational economic well-being.
Expanding our coverage to explore the intersection of mental health and financial markets would greatly benefit our readers, offering them a deeper understanding of this evolving economic landscape.
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