Last week the Fed again lowered its economic forecast for the U.S. to 1.8%-2.0% (from 2.0%-2.3%).
While the Fed doesn’t want to connect the dots for you, I will be happy to do so.
This slow growth is the inevitable result of too much debt, too much regulation, too many new entitlements like ObamaCare, and a total absence of meaningful fiscal policy such as tax reform. We are governed by a confederacy of dunces at both the Fed and in Congress and the White House, and they are leading us straight into the jaws of another financial crisis – or Super Crash.
This means that growth will be slow for years to come and interest rates will remain suppressed. In fact, that is Super Crash Inevitability #2: The global economy is stuck with sub-par growth.
When it comes to the assets and investments you may hold, this has an especially nasty effect on your bonds.
It will continue to render traditional bond investments unattractive because they will continue to offer extremely low yield. All you have to do is look at the returns being generated by even the most highly respected bond managers in the world and the largest bond funds in the world to realize that you will go hungry depending on bonds for income and total returns.
There is one way bond yields will “go up”… but it’s not good.
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