Wednesday Musings
Wednesday Musings
“If you do not take risks for your opinion, you are nothing."
– Nassim Nicholas Taleb
This past week Markets (S&P500) were up slightly, and are now up just over 12% for the year.
Inflation is still the key debate in markets, but markets seem to be moving towards my thesis - this shall pass.
The bond market is your real time view on how markets view inflation. This view is expressed in the difference between short term and long term interest rates, specifically the 2 Year and the 30 Year US Treasury bonds. This difference is charted below.
This difference is the bond markets expectation for the average of inflation combined with GDP growth over the next seven years. As you can see in the chart this was much higher 10 years ago and never materialized. Right now we are sitting at a spread of 219 basis points. That means the bond market is expecting an average of GDP growth and inflation to be just over 2% - hardly a cause for concern.
Inflation hawks are shouting and fear mongering from the rooftops to everyone who will listen. Based on what we see below, the bond market is not one of them.
This Weeks Good News
Seven-Year-Old Swims an Hour to Save Family After Boating Incident: ‘That’s What Saved Our Lives'
A little boy in Florida is being praised for helping save his family members following a recent boating accident. Seven-year-old Chase Poust saved himself and his loved ones on Friday when he, his four-year-old sister, and their father were on a boat fishing on the St. Johns River.