Inflation Series Part 9 Conclusion: Inflation Rises, But Even In The 1970s, There Were Bond Rallies
Markets do not move in straight lines. They chop up and down around long-term trends as market forces, traders and news flow batter them about. During the 1970s, there were 3 major recessions that were characterized by:
1. Falling earnings
2. Falling employment
3. Falling inflation
4. Falling yields
Remember, for bonds "yields down=price up". That means that as bond market yields fall, investors collect the coupon and some capital appreciation on the underlying bond. There are opportunities here for those who follow the logic.
I'm attaching a chart of bond yields and inflation during the 1970s with the recessions marketed out. The picture is a textbook example of cyclical short-term movement around a secular long-term trend. Do you see it?
If you'd like to discuss how to manage your portfolio through this environment, please reach out to us at email@example.com.
Robert Lloyd, CFA®
Chief Investment Officer
Lloyds Intrepid Wealth Management
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