FAST FIVE: Blain: If Yields Rise Any Higher, The Melt-Up Will Quickly Reverse
(I note with some amusement Greece yields less than Italy!) 10-year Treasuries flirted with 2% yesterday – now at 1.90%. Source: Bloomberg There is massive danger in a reeling bond market. If we see rising yields morph into a serious bond market meltdown, the melt-up in stocks could split and go rancid very quickly.
The real global growth narrative is far more nuanced than just trade wars: Factor in policy mistakes like central banking monetary policy since 2008 – low rates fuelled financial asset inflation, but not real investment, while political mistakes like austerity-spending imposed massive slowdown. End that repression, and a recovery in consumer wages and spending back to pre-crisis levels could fuel a spending boom. That's a short-term positive.
As China slows as its economy turns to consumption, the world slows with it.
I've warned a couple of times that even a modest rise in bond yields could trigger a new bond crisis.
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