Re: "it seems reasonable that bond yields will drift toward their pre-COVID levels."
They might not due to increased demand for capital relative to prior to the pandemic (electrification, defense, rebuilding supply chains, automation) whereas btw 1985-2021 tangible investment (net residential real estate) was declining. "From 1985 to 2021, tangible investment—including property, factories and equipment—decreased from 12.5% to 8.5% of private gross domestic product. That decrease was more than compensated for by growth in intangible investment—including intellectual property, software and process knowledge—which rose from about 11.5% to 16.75% to meet the demands of an increasingly digital economy. Overall, the rate of total private capital investment from 1985 to 2021 grew only 1%."
"the appetite for drama is high, but for fundamental disruption, it is low" great encapsulation!
"tariffs can fall yet further—which would be an upside surprise for stocks and bonds" Would lower tariffs really be bond bullish? I get your "less drag on growth" angle. But wouldn't the "larger budget deficit" component largely offset the "growth" component and lead to higher bond yields?
Re: "it seems reasonable that bond yields will drift toward their pre-COVID levels."
They might not due to increased demand for capital relative to prior to the pandemic (electrification, defense, rebuilding supply chains, automation) whereas btw 1985-2021 tangible investment (net residential real estate) was declining. "From 1985 to 2021, tangible investment—including property, factories and equipment—decreased from 12.5% to 8.5% of private gross domestic product. That decrease was more than compensated for by growth in intangible investment—including intellectual property, software and process knowledge—which rose from about 11.5% to 16.75% to meet the demands of an increasingly digital economy. Overall, the rate of total private capital investment from 1985 to 2021 grew only 1%."
https://www.wsj.com/articles/capital-is-making-a-comeback-intangible-tangible-climate-change-technology-demographic-automation-productivity-5f5bab66
Does Debt/GDP pose any worry for the rates going forward? Do you subscribe to Scott B's logic of growing out of debt ?
"the appetite for drama is high, but for fundamental disruption, it is low" great encapsulation!
"tariffs can fall yet further—which would be an upside surprise for stocks and bonds" Would lower tariffs really be bond bullish? I get your "less drag on growth" angle. But wouldn't the "larger budget deficit" component largely offset the "growth" component and lead to higher bond yields?