Why the market is more reliable than the 'experts'
After the worst start to the year in decades, global bond markets have convinced themselves that they face a double threat; one from inflation destroys real yields, and the second from the Federal Reserve and other central banks to deliberately engineer sharp interest rate hikes so that they create a recession, and credit markets are even worse than sovereign debt. Data that supports this view is highlighted, while data that does not support is mostly ignored. Recession warning But then in the middle of last month, long US bonds started to rally from yields near 3.5 percent and the narrative began to shift from stagflation – inflation and poor economic growth – towards an outright recession. Forget that this might just be a value based asset allocation decision, or anything to do with rebalancing quantity funds, it’s taken as proof of new economic forecasts. The Euro-dollar market is now saying that the Fed is not going to raise interest rates more and commodity prices are fallin...