- We see a secular bear market in bonds. Given that a large part of this move is already behind us, it is better to think from here in terms of higher lows and higher highs in yields.
- The bond-equity correlation, while still negative on average, is likely to weaken owing to more frequent supply shocks, which will produce episodes (like 2021-23) where the correlation switches to positive. This should raise term premia and dilute 60:40 returns.
Articles I’m reading
Dario Perkins of TS Lombard updated on where we are in the economic and business cycle, along with all the peculiarities of this post-Covid cycle that we’re experiencing. In short, we all know it’s not a usual business cycle, which suggests that we cannot use traditional models or templates to analyse it.
It’s in a Q&A format, and ended the post with thoughts on the implications for financial markets over the longer term:
