11 days ago • 1:43 min
US stocks have trounced US Treasury bonds since the global financial crisis. But that’s likely coming to an end: with a sharp slowdown in global growth likely just around the corner, it’s starting to look like bonds’ time to shine.
This chart shows how stocks have performed, relative to Treasuries, since the late 1980s. When the line is going up, stocks are generating higher total returns than Treasuries. When it’s going down, the reverse is true.
Here’s the thing: when monetary conditions are accommodative (i.e. when interest rates are low) and the economic outlook is promising, return-seeking investors tend to dump low-risk Treasury bonds in favor of higher-octane stocks. This tends to boost the price of stocks relative to that of bonds, and explains why stocks outperformed bonds by so
US consumers are already struggling to deal with eye-watering inflation. Soaring housing costs are the last thing they need.
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