Es difícil contestar. No hay
rendimiento alguno en los activos por tipos de interés negativos. Los bonos
andan muy bajos, y las bolsas, sobre todo Wall Street y Alemania, muy altas.
Sólo queda esperar a un recorte para invertir dinero nuevo…
5 Thoughts on a World with No Yield
The latest JP
Morgan Guide to the Markets has
an incredible chart showing how yield-starved the fixed income markets are
across the developed world:
Around 90% of developed countries have
government bond yields of 1% or less. Almost 40% of these countries have
negative yields.
Rates are low for a
reason. We’re in the midst of a depression which is a deflationary force and
central banks are doing their damnedest to keep rates down to be able to fund
all of the government spending and keep borrowing rates low.
I don’t pretend to
know the path of rates going forward but safe bond yields at these levels are
bound to have unintended consequences. Here are some thoughts on what this
means for investors:
1.
Savers shouldn’t expect much. My online savings account currently offers 1.05%
interest but I don’t expect that number to remain above 1% for very long. The
Fed has set their short-term benchmark rate at 0% and it sounds like it’s going
to stay there for a few years at a minimum.
JP Morgan also
shared a chart showing how much you could earn on savings accounts going back
to the 1990s:
Not only are current rates likely to lose
out to even a hint of inflation but there’s no way they can keep up with
spending categories such as education or healthcare where prices have risen
faster than the averages for years.
The days of earning
5-6% interest on your savings are over.
2.
Borrowers are getting help. Savers are being punished but borrowers are in a
position to take on debt at the lowest rates in history:
Once you factor in the tax savings on a
mortgage and inflation you’re essentially borrowing for free on a net-real
basis these days. If you can get approved for a mortgage or re-fi, you can save
some serious money on long-term interest payments.
3.
Investible assets have to go somewhere. The stock market can act as an incinerator of investor
capital at times, much like it did earlier this year but money has to go
somewhere. Sure, everyone could simply sit in cash if they’re worried about the
stock market but that’s not a long-term solution, especially at today’s yields.
By keeping interest
rates low, the Fed is begging investors to take more risk with their capital.
This might be the simplest explanation for the continued strength in the stock
market.
4.
Historical valuations tools will be harder to use. I know, I know — Ben, are you saying this time is
different!?
No, every time is
different but in terms of rates, it’s really different
this time.
If you’re waiting
for valuations to revert back to some magical 15x average CAPE ratio from 1871
you may be waiting for a long time if the low yield environment is here for
some time.
The best argument
against this line of thinking is a place like Japan where interest rates have
been on the floor since 1990. Rates have been low or negative in many European
countries for a number of years now too.
My counterargument
to that case would be the United States now makes up 55% of the global equity
market cap. Fifty percent of all Americans take part in the stock market (it
was just 1% of the population in the Great Depression). Americans are on their
own when it comes to saving and investing for retirement and we have a much
worse social safety net than these other countries.
At the height of
the dot-com bubble, the highest stock market valuations in history, investors
could still earn 5-6% yields on U.S. Treasuries. That is not the case today.
Valuation is not
useless but it does require context.
5. Mini
booms and busts may be here to stay. In a world with no safe assets that offer investors a
living yield on their investments, where investors are pushed further out on
the risk curve, there will likely be more volatility.
The Fed may have
taken the Great Depression scenario off the table but it wouldn’t surprise me
to see more super-fast bear markets like we experienced in March but also to a
lesser degree at
the end of 2018.
I wouldn’t be
surprised to see more flash crashes or sharp bear markets that recover
relatively quickly in the months and years ahead.
I’m still thinking
through the many different ways investors and savers can prepare themselves for
this situation but I feel safe in labeling this the hardest market environment
ever for retirees.
There are no easy
options available to investors today.
Abrazos,
PD1: Siempre compasión con el
que sufre, con el necesitado, con el que anda solo, con los enfermos, con el
duelo de los muertos… Es lo que define a los cristianos que bien lo aprendimos
del Señor: mucha compasión…
