Bond Update

The move in interest rates since the election (and really since the low over the summer) has been impressive.  There are a whole host of unintended consequences if rates move higher in a world where the stock market is overvalued, economic growth is tepid, debt is in large supply already, and the spigots of fiscal policy seemed poised to be turned on under Trump.

So, with that as context, I decided to look at the charts to determine whether it is safe to say that the 35-year bull market is over.  Short answer, until the 10-year bond (as proxy for all bonds) cracks north of 3%, then the downtrend in rates remains intact.  With that said, the double bottom (hit almost exactly 4 years apart in 2012 and 2016) speaks to a potential change of course.  But, we must wait for confirmation, especially as there are plenty of smart people that I follow who are making the case for even lower rates when the next recession hits.