As the dizzying pace of stock market volatility continues shock turns to the question, what is the right course of action. To make successful decisions starts with the answer to a bigger question. What is causing the upheaval?
Recently we put electronic ink to virtual paper in an article making the case for a strong dollar. Our rational was based on the new Federal Reserve leadership raising interest rates in multiple increments this year. The reason for this prediction is that the long term trend of disinflation is over and the Fed’s target of a 2% inflation rate is being exceeded. That calls for an end to ultra low cost money.
Investor anticipation of multiple rate hikes started showing last September when the 10-Year Treasury Note was selling for at a record low yield of 2.06% before raising to 2.85% early this month. That is one of the highest yields in a decade. The 10-Year Note is a good benchmark of where investors anticipate future inflation.