Yet Another Example Of Hope Over Reality In The Markets

Real Interest Rates Say Much About The Current Risk Level

In yet another demonstration of hope over economic reality, we present a chart illustrating that both B and BB rated bonds (aka junk) are currently trading below the rate of inflation.

Therefore, equities, Treasury and junk bonds are all now trading with negative real returns.

Even if the current spike in inflation proves transitory (which we believe is still most likely), the indifference to risk that has driven junk yields to such low levels attests to the historically poor risk/reward presented by capital markets.

Caveat emptor.

Our recently published June issue discusses our strategy for protecting the profitability of our long positions and approach to navigating the market volatility we anticipate. And as usual, we update our views of major equity, bond, currency, and commodity markets.

If you found this post of interest, you’ll find the Global Investment Letter of value. To view free sample issues and to receive our weekly investment comment please visit: https://www.globalinvestmentletter.com/sample-issue/