The devil’s advocate

We believe that the major global determinants of secular inflation (globalisation, technology, demography) will continue to hold price growth down. But there is also an economic cycle that will inevitably raise bond yields in several ways. Should US 10-year bond yields go back to their average of the last 20 years in real terms, nominal yields would be back at 3.5% even with a modest cyclical recovery in inflation. That has implications for both equity markets and the dollar.

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