Why Today Is the Best Time EVER to Own Real Assets
Government bonds are taking a beating.
Over the past three months, the yield on the U.S. 10-year Treasury has surged from 1.37% to 1.80%. It’s now at its highest level since June. (A bond’s yield rises when its price falls.)
This has many investors worried…and not just in the U.S.
On Monday, the yield on the German 10-year hit a four-month high. Same with the British 10-year. According to Bloomberg Markets, government bonds had one of their worst selloffs in months.
Yields on 10-year notes rose to the highest since at least June in Australia and New Zealand on Tuesday, while those in Taiwan surged by the most in three years. The moves came a day after the yield on South Korean debt maturing in a decade reached the highest level since June.
• This is a major shift in investor thinking…
You see, government bonds are considered a safe-haven asset. Many investors buy bonds when they think stocks or other risky assets will do poorly.
After the Brexit, money poured into government bonds. Yields on many of these bonds hit multi-year lows. Some touched all-time lows.
With investors now fleeing government bonds, some analysts think the global economy could be taking a turn for the better. But that’s not why bonds tanked on Monday…
• Central bankers sounded the alarm on inflation…
The Wall Street Journal reported on Monday:
Bank of England Gov. Mark Carney said Friday that the BOE will tolerate a small overshoot of its inflation goal to prevent unemployment in the U.K. from rising sharply. Fed Chairwoman Janet Yellen said Friday that it is useful to consider the benefits of a “high-pressure economy,” interpreted by analysts as a sign that she is willing to accept inflation running a bit higher than the Fed’s 2% target.
Inflation measures how fast prices for everyday goods and services rise. When inflation is rising, the money in your wallet buys less stuff. In other words, inflation hurts the average Joe.