For those that missed it, Clime released their 10 calls for 2014, including: The most confronting development for equity markets in 2014 will be weakening...

For those that missed it, Clime released their 10 calls for 2014, including: The most confronting development for equity markets in 2014 will be weakening bonds. Many commentators fail to understand that today's bond yields are held down by unprecedented monetary policy settings. Bond yields today do not acknowledge default risk, currency risk or inflation risk. Bonds trade under the tight control of central bank interference, which has worked in a period when demand for credit has been extremely weak. That is, QE has worked and not spiked inflation because of rising savings ratios, ageing populations, high unemployment and the fact that China has for a decade exported deflation to Europe, US and Australia. Therefore, if bond yields go up as they should, it will be caused by a market that has independently lost confidence in the bond market. Should that occur, then it will certainly test the equity market.


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