Is the 40-year era of falling bond yields and low inflation coming to an end? That is the question investors have been asking themselves for months, and now that October's CPI reading hit its highest level since 1991, it is a query that can no longer be avoided.
Eric Basmajian of EPB Macro Research is confident that all this anxiety is unnecessary. On today's episode of Forward Guidance, Basmajian tells Jack Farley why he thinks the rate of inflation will soon relent, and why he thinks the bull market in bonds is nowhere close to over. Pointing to the fall in economic growth rates as measured by industrial production, hirings, and real rates of consumption and income, Basmajian argues that an overweight allocation to Treasury bonds will protect investors from a slowdown in growth, as can be seen by the rolling over of coincident factors such as industrial production, hirings, and real rates of consumption and income. Basmajian explores particularly explosive parts of the Consumer Price Index like durable goods and rent, and he explains his long-term view that aging populations will ensure low bond yields in the United States just as they did in Europe and Japan.
Basmajian's article on demographics:
https://www.epbmacroresearch.com/blog/the-global-demographic-vortex
Basmajian's article on rent inflation:
https://www.epbmacroresearch.com/blog/are-you-worried-about-rent-inflation
The Dallas Fed's paper on rent inflation:
https://www.dallasfed.org/research/economics/2021/0824
