Bond market turmoil
Both last year and this year, we have witnessed turmoil and corrections in the bond market. While the downturn in 2022 took place against a backdrop of soaring inflation and accelerated monetary tightening, 2023 was a different story. Bond market developments this year have been characterised by more moderate inflation and central banks increasingly signalling that they are at, or close to, the end of the tightening cycle.
Recently, we have seen the 10-year US government bond rise above 5% again, while a 30-year mortgage in the US has reached 8%. The market expects that the high-interest rate levels created by the historically aggressive rate hikes of recent years will be around for longer than previously thought.
This development has also meant that bonds have once again become the subject of interest among investors. For a number of years, it seemed that there was no real alternative to the stock market when it came to investing. However, equities and bonds are not two independent entities. If we are to understand the outlook for the stock market, it is necessary to look at the bond market to get a sense of where we are heading.
