Back to the Past: 1980s Redux?
This is a confounding time to be in the capital markets. We seem to be surrounded by incredible change on every front. For better or worse, political, economic, regulatory, and health shifts have created a traditional “trader’s market” — a market that proves the grit of folks, and the merits of active strategies. From a rates perspective, we have to go back in time to the 1980s (yes, big hair, Back to the Future, suspenders, and compact discs (CDs)) to make sense of some of the charts traders are watching.
Commodities are on a tear this year, on the back of 2021, their largest annual increase since 1979/80 and inflation rates are like those in the 80s. The record low ten year treasury yield of 0.54% seems like a dream now as it crossed above 3.0%. Traders and hedge fund managers are staking their money, and their investors’ money, on whether these are ephemeral, transitory moves, or the start of a new rate regime. What happens next will be battled in the markets. That is the challenge and the opportunity of this type of market.
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