This is the world we live in today: Stocks are priced as if the global economy is booming, while the bond market is priced as if we’re in a worldwide depression.
Nowhere is this truer than in Europe, where stocks are at or near record highs while yields on sovereign bonds are at record lows, below zero in many cases.
Of course, we’re neither in a boom or a bust. While we’re closer to the former in the U.S., we’re a lot closer to the latter in Europe. The bond market in Europe is telling us that the euro zone economy’s in the tank, which is much closer to reality, while the stock market there is now trading at a seven-year high. Continue reading "Are We In A Boom Or A Bust?"→
Readers of my most recent columns know that I’ve been very critical of the Federal Reserve’s sluggishness – if not actual lack of resolve – to start raising short-term interest rates now that the economy has finally started to show some staying power. The earliest projections, both from Fed officials and market prognosticators, is that the first rate hike won’t come until well after the end of the first quarter of this year, if not sometime in the second half.
But even if the Fed should start taking my advice and start raising rates sooner – it looks like the March 17-18 FOMC meeting would be the earliest – don’t draw the conclusion that I also think long-term interest rates are headed any higher anytime soon.
If anything, I think long-term rates are headed lower in 2015, meaning I think this year will be another good year for bonds, U.S. Treasuries specifically.
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