bond market

Looking Ahead

As the Fed’s asset purchase program ends, the price of oil plunges, global growth stalls, and the stock market recovers from its fall jitters, this seems like a good time to take a long view of where we are in the post-apocalypse recovery. The best guide to any such assessment remains Reinhart and Rogoff’s brilliant survey of financial crises, This Time Is Different, published in 2009. In their preface, they write: “If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by governments, banks, […]

Volatility Low & Risk High: What Does This Mean?

As the U.S. stock market hits new highs, and bond yields continue baffle everyone who “knew” that interest rates were bound to rise this year, the most dramatic data point of all might be volatility, which keeps plumbing remarkable lows. And this isn’t just stock-market volatility (as measured by the VIX index), the intermarket volatility index, which averages expected volatility of stocks, bonds, currencies, oil and gold is at its second lowest reading in 20 years. What does this mean? Not sure–mixed signals. One the one hand, low volatility means that prices aren’t moving much either way, which means that […]

Should You Rebalance Today?

For much of the past year, I have argued in several blogs that bonds should be regarded as risky assets.  When ten-year Treasuries were yielding less than 2%, for example, I pointed out that this meant their prospective real return would almost certainly be negative.  On September 13, I warned about the potential for a liquidity crisis in the corporate bond market next time it encountered heavy selling pressure.  And “What Next?” posted on October 11, concluded that the various scenarios following Federal Reserve “tapering” of quantitative easing all favored the stock market over the bond market. With the year-to-date […]