The U.S. and global economy witnessed a series of short-lived boom/bust cycles last decade. Periods of strength proved fleeting, and were soon followed by bouts of weakness and even recession scares. This created a roller-coaster ride for bond yields, monetary conditions, and equity market performance. This up/down pattern was quite different from the prior decade, which saw the economy come roaring out of recession in 2003 and stay sufficiently strong to trigger a lasting rise in bond yields and a durable rate-hiking cycle.
A just-published report examined a number of key investment issues, including whether or not the 2010s is the correct framework for the bond market and monetary policy, or if something different will transpire in the 2020s. The global economic expansion has so far proven to be resilient and robust, even with periodic COVID-19 setbacks. However, government bond markets are betting on a return to the 2010s. Assuming the most recent variant scare, which has emerged in recent days, will not undermine economic sentiment, then we expect a very different outcome than last decade for bonds, monetary policy and, ultimately, risk asset markets. Stay tuned