- Recent history shows that bond sell-offs have been good for shares. This need not remain the case.
- RIsing yields because of fears of rising interest rates are very different from rises because of stronger economic growth.
Many of you believe there’s a risk of a big sell-off in bonds. It’s easy to see how this might materialise. Yields are now being held down by promises from the Federal Reserve and Bank of England to keep short-term interest rates low. If, however, inflation proves to be more of a problem than they expect, they could withdraw such assurances thereby removing the anchor that is holding yields down.
Which poses a question: what would this mean for equities?