On Wednesday, I wrote about the positive and negative of rising interest rates for bond investors. I also promised a follow-up to share my opinion on where interest rates go from here so let’s dive into that.
Note: In both today’s and the recent commentary, I’m addressing treasury bonds, specifically, not to be confused with corporate bonds, which I hold relatively very little of across client portfolios as I’m purposely avoiding credit and default risk at this point in the market cycle.
In short, I believe by the time this market cycle is complete over the next couple years, interest rates on 0-10 year treasury bonds could fall back towards zero again. This would imply a great investment opportunity in an asset class that is widely hated at the moment! But that’s how it normally works doesn’t it?
Obviously, if inflation is sustained for a prolonged period then rates will continue higher, but I don’t think that’s the likely outcome. Therefore, this is really a forecast about inflation / deflation over the next couple years. Continue reading “Follow Up: Where Will Interest Rates (Inflation) Go?”