By Ben Carlson, CFA
A Wealth of Common Sense
Around 90% of developed countries have government bond yields of 1% or less. Almost 40% of these countries have negative yields.
Rates are low for a reason. We’re in the midst of a depression, which is a deflationary force, and central banks are doing their damnedest to keep rates down to be able to fund all of the government spending and keep borrowing rates low.
I don’t pretend to know the path of rates going forward, but safe bond yields at these levels are bound to have unintended consequences. Here are some thoughts on what this means for investors:
1. Savers shouldn't expect much.
2. Borrowers are getting help.
3. Investible assets have to go somewhere.
4. Historical valuation tools will be harder to use.
5. Mini booms and busts may be here to stay.