For years, we’ve been hearing that there is “no alternative” – ​​TINA – to equity, and thanks to the Fed, “cash is junk.”

No more. The Federal Reserve, in a belated attempt to fight inflation, cranked rates today to a point where, here Stock is an option: bond

In response to events such as the Long Term Capital Management implosion of 1998, the 2000 dotcom crash (2001–03), the terrorist attacks of September 11, 2001, major financial crises, the Fed began its first panicked rate cut in more than two decades. In 2007-08, three 25 bps cuts in 2019 for unknown reasons, and a rate cut during the pandemic in 2020.

Despite what you may have heard, the Fed is not the only factor driving equity markets. However, they are significant – and rising rates this year have been a headwind for both equities and the economy.

Market drawdowns occur on a very regular (if not scheduled) basis. But SPX’s -23% may not be the biggest story of 2022: The single most important change is the end of the bond bull market that dates back to 1981. This is a once-in-a-generation, possibly once-in-a-lifetime event.

There is no small irony that the 4-decade long bond bull market was also kicked off by a Federal Reserve inflationary response. Alas, today’s inflation is 1) not the same as in the seventies; 2) the economy is nothing like the double-dip recession of the 1980s; and 3) Jerome Powell is not Paul Volcker. 1 and 2 are good, I suspect 3 is problematic.

2022 may not be 1981-82, but for the first time in years, bonds are an attractive investment option. In addition to providing diversification versus equity, and some ballast for an allocation, you now pay to own them.


The 10 year treasury bond Kissed a 4% yield yesterday and is now trading under:

Municipal bonds Yielding between 3 and 5% – taxable equivalent of 4.4 to 6% yield or better (according to Bankrate’s Tax Equivalent Yield Calculator)

High-grade corporate Yields greater than 4% (if you go lower in quality (disadvised) see Moody’s Seasoned AAA Corporate Bond Yield (AAA)

Of course, the downside of higher yields is that mortgage rates have all gone up: a 30-year fixed mortgage has gone from 3% to almost 7%! Housing is usually the first place where higher rates bite the economy.


More irony: now that TINA is gone, and equities have an alternative, we will soon reach a point where stocks become very attractive. We are getting closer to that moment.

see more:

Global Bonds Rally After 10-Year Treasury Yield Hits 4% (WSJ, Sept. 28, 2022)

Expected returns for bonds are finally attractive (A Wealth of Common Sense, September 27, 2022)

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