Ghost of Igloi wrote:
all time highs again
We're in a weird time when good news in the economy is actually good news for the stock market. GDP and jobs numbers better than expected and it's considered a positive for stocks. Probably because everyone knows that interest rates are unlikely to go much lower, and they are very low, so let's just hope for better than the anemic economic results of the last year.
It sort of leaves the question though of if we can't raise rates during the most powerful bull run ever, when can we raise rates? Is inflation a thing of the past?
Good questions. Bond fund manager Hoisington Asset Management believes the 10 Year Treasury reaches 1% on the basis that we are in a deflationary low growth environment. Economist Sri Kumar has a similar theory expecting 0.75-1.00% on the 10 Year. You would think with a aging demographic in developed economies there is a greater demand for income with demand driving yields lower. However, there are others that believe the low yield phase will be followed by fear that governments will be unable to meet obligations driving yields higher.
it's all about inflation, yes. If inflation stays at 1-2% forever then we don't need no stinkin' rate increases. Forever.
and anyway, of course, the market sets all interest rates but the ultra short rate. fed couldn't increase long term rates materially even if it wanted to. A smidge, sure.
That would imply 0-2% GDP growth.....forever!