Heard an interesting contrarian line of reasoning from one of the talking heads on Bloomberg this morning. While conventional wisdom holds that bonds and equities move in opposite directions, he thought not so under current conditions. Here's the (I think fascinating) argument:
As equities and other risk assets rise to lofty levels, money managers (especially pension funds) need to keep rebalancing their portfolios on a regular basis. Therefore, some of the big gains from equities are being continually reinvested into bonds, keeping rates artificially low and boosting bond valuations right along with equity prices. It's an interesting explanation of why both bonds and equities remain expensive. The following two links don't address that argument directly. (Couldn't dig up the Bloomberg comment.) However, both shed some light on current bond and equity valuations. FWIW
https://www.bloomberg.com/view/articles/2017-04-19/high-stock-prices-and-low-bond-yields-can-t-lasthttps://www.fxstreet.com/education/lesson-from-the-pros-stocks-201009280000
Comments
You noted: "and I have heard it for years already, even a broken clock is right."
Might you explain, "I have heard it for years already". Heard or understand what (?) regarding this thread subject and/or the links provided by @hank
Thank you.
Catch
What I hadn't heard before was the argument that higher equity prices are actually keeping interest rates low (because of the rebalancing effect). Don't know if that's plausible or not. If FD1000 or anyone else has seen that particular argument in the past and can cite sources for it (which I was unable to do) I'd love to see it.