Nov. 24, 2024 –When the US election was called for Donald Trump the night of November 5, the stock market rose but the bond market fell. The yield on 10-year US government bonds increased from 4.3 % to 4.4%, where it remained 10 days later. The long-term rate had been below 4.0 % in September. The combination – stock market up but bond market down – strongly suggests that the news of Trump’s victory was seen as implying higher government budget deficit and debt numbers in the future.
July 30, 2024 — The US stock market is on a tear. Since the start of this year, January 2024, the Dow Jones , S&P 500, and NASDAQ have each repeatedly set new all-time records. Indeed, the trend in stocks has been strongly upward for the last two or three years. For instance, the S & P 500 is about 40 % above where it was in January 2021, when Joe Biden became President [43 % higher].
The price of gold has also shown a strong upward trend, reaching $2,470 an ounce on July 17, the highest in history. Why are these assets so elevated?
August 14, 2023 — What a difference a year makes! In 2021, interest rates were close to zero in the US and the UK, and slightly negative in the eurozone and Japan. They were expected to remain low indefinitely. Remarkably, as recently as January 2022, investors thought that the probability the interest rate would rise above 4.0 % within 5 years was only 12% in the US, 4 % for the euro-zone, and 7 % for the UK [p.45]. Those were short-term nominal interest rates. Correcting for expected inflation, real interest rates were substantially negative and expected to remain so.