Can Stocks and Bonds Both Be Right? Actually, Yes
The Fed has put a ceiling on debt yields and a floor under the S&P 500.
A $250 trillion debt overhang isn’t going anywhere soon.
Photographer: Lionel Bonaventure/AFP/Getty Images
In September, as part of a Bloomberg Opinion series on the 10-year anniversary of Lehman Brothers’s collapse, I wrote about the huge buildup in global debt over the decade, to almost $250 trillion. At the time, the S&P 500 Index was on the verge of reaching its record high, the 10-year Treasury yield was about 3 percent, the yield curve was far from inverting and traders had priced in two more Federal Reserve interest-rate increases by the end of the year.
In other words, while the global figure was eye-catching, investors perhaps didn’t quite grasp the meaning of living in a “debt, debt, debt, debt world.” They’re starting to catch on now. My opening line, from September: