Myth – when short and long term interest rates are equal, a recession is imminent

September 7, 2016

It’s no secret that the best you can get in a short term high interest savings account is 1% or less.   It’s also clear that many countries in the world are paying negative interest rates on their 3yr or greater government bonds. Historically the yield (or rate of return) on holding bonds increases as the holding period (duration) increases.   This is still true in Canada and the US but not in Switzerland, Japan, France, Italy, Germany and a number of other countries. So in many countries the “yield curve” which compares rates of return for different holding periods is flattening or inverting. It has been thought that this is the precursor to a recession – but not so fast says this author.

Link to article.

ON THE OCCASION OF SIMULTANEOUS NEW ALL-TIME HIGHS IN THE DOW, NASDAQ AND THE S&P 500  (AUGUST 12, 2016): “All the money that has ever been “lost” in all the temporary equity market declines of all time has now been returned—albeit to other people: long-term investors with faith in the future, patience, and the discipline to continue working their long-term plan. The tragedy of pessimism is once again complete.” Nick Murray