Eurodollar University: One of the Worst Bear Markets in History Already Happened

The past four years have been unprecedented for the economy. A global shutdown was attempted to halt the spread of Covid 19. Countries provided citizens with stimulus checks. And central banks took interest rates to zero percent.

Today’s economy stems from the moves to recover from that situation. In just over 18 months, interest rates in the U.S. have gone from zero to over 5%. That’s the highest level in 13 years.

Part of that fallout is that fixed income investments are starting to look attractive in real terms. The cost of money is no positive after inflation. That encourages saving. It also discourages investing in the stock market.

Looking at last year’s bear market amid the high inflation, the 2022 drop was one of the harsher bear markets on record in real terms.

That means the economy could actually be in a recovery mode today. Stocks are rising, and inflation is coming down. While it’s not down all the way yet, markets have adjusted to higher rates so far.

While there could still be some lingering effects from these moves, we may be closer to normal than abnormal. After several years in uncharted waters, that’s a relief.

Today’s investors can still expect the stock market to rise, albeit at a slower rate than the past. But fixed income also offers a reasonable real return also.

To watch the full interview, click here.