Will interest rates rise or fall this year?
If I’d assembled the 100 smartest economists, strategists, investors, policy makers and a bunch of dummies 5yrs ago, and told them what the Fed would do, how their balance sheet would grow, where the stock market would be, not a single one would have guessed where inflation is, and where long-dated yields are. So we’ve had one of these historic market situations where nearly everyone has been wrong in an enormous structural way. And they’ve had to admit they’re wrong; no ones likes that. But now people have finally begun to intellectualize why yields are so low, and inflation is muted. The weight of the newly converted will drive the final blow off lower in yields. Which will see new rounds of global stimulus – the final overshoot that you tend to see in these cycles – and that will be the catalyst for a bond reversal.
Eric Peters seems to be feeling that a major inflection point is at hand – triggered by the Swiss being the first major central bank to throw in the towel on a particular monetary policy by kicking the peg out from under the franc.
He sees us on the threshold of a whole lot of unprecedented stuff around the world, between currencies, commodities and the regional World War III now being exported from the middle east. The above comes from his regular weekend notes.