The spectacular departure of Pimco bond whiz Bill Gross last month to join Janus Capital raised the question of whether it is the end of the bull run in bond markets that Gross successfully predicted in the 1980s.
Debt has grown faster than stocks because lower interest rates pumped up financial asset values, especially if such investments were leveraged.
With interest rates in advanced economies at historical lows, there are bubbles in both financial assets and real assets. With the US Federal Reserve threatening to withdraw quantitative easing as the US begins to show signs of recovery, bond markets and equity markets, especially in the emerging markets, are beginning to drop.
This article first appeared in The South China Morning Post on October 11, 2014. To view the entire article, please click here.
The views expressed in this article are the author’s own and do not necessarily reflect Fung Global Institute’s editorial policy.