Imagine an oracle last year told you that the US inflation rate would accelerate to a four-decade high of 6.8 per cent by Christmas. Most investors would immediately rinse all fixed income from their portfolio, and take a long hard look at those glamorous growth stocks.
Instead, the 10-year Treasury yield is trundling along at 1.4 per cent, up just half a percentage point from where it started the year. Even the 30-year US government bond yield — which should be hypersensitive to any whiff of inflation — has only nudged up from 1.6 per cent to 1.8 per cent.
Of course, swaths of the bond market have indeed been under pressure this year, and many of the stock market’s biggest pandemic-era winnershave swooned lately. Nonetheless, that even foreknowledge of 2021’s most widely anticipated macroeconomic variable would not necessarily have made you money shows how delightfully humbling financial markets can be.