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Deficit Spending Will Send S&P 500 To 6,000 And Beyond | George Robertson & Mel Mattison on the True Risk-Free Rate and The Fed's Control of The Treasury Market
Forward Guidance
Nominal GDP Rules the Market
The discussion centers on the relationship between long-term U.S. Treasury yields and nominal GDP growth. It argues that if nominal GDP is growing at a robust pace, Treasury funding costs cannot lag significantly behind this growth rate. The persistent low yields on long-term bonds, despite strong nominal GDP expectations, illustrate a disconnect that contradicts logical financial frameworks. This scenario has contributed to the prolonged bull market in bonds since the 1982 peak, highlighting the fundamental importance of nominal GDP over real GDP in understanding market dynamics. Real GDP has been suggested as a misleading metric used by analysts seeking to rationalize market conditions when predictions about economic downturns do not materialize.
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