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Outside the Box: Is the bond market embarking on a 1946-like 35-year cycle of rising rates?

Interest rates follow very long-term cycles. This chart highlights a 35-year (1946-1981) bond market, but unlike our most recent-35 year (1981-2016) bond market, it was in a rising rate environment. Yields climbed from a low of 2% to a high of 16% over those 35 years. A series of labor strikes in 1946 (big ones, like when U.S. troops seized control of U.S. railroads during rail union strikes) pushed the American economy into an inflationary spiral so much so that inflation surged 20% that year, and with it yields broke out.

Fast forward to 2016. The sudden spike in yields this year (the 10-year yield jumped 21% post-election—the largest weekly gain ever), prompted me to think of this 1946 analog.

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