A much-ignored data point in all this equity market euphoria is the steady rise of global bond yields since August 2020.

Globally, yields have moved up nearly 40 bps (0.4%). That number may not seem alarming in itself. Unlike equity, bonds are considered to be stable investments. So, there is little tolerance for any movement. A 0.4% correction in bond yields would translate into a 35%-40% correction in equity markets.

This only indicates that global inflation fueled by the US Fed will raise its head again having major ramifications on physical asset prices. But this time the central banks will be left with a problem that liquidity cannot solve. The US FED is committed to keeping interest rates lower for longer. However, emerging market economies will eventually be forced to decouple from the developed economies in this interest rate cycle game.

We are investing in very interesting times.

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