The 60 year history of US nominal GDP growth and bond yields shown here is one of the clearest guides to the medium term direction of interest rates

John Robertson

PortfolioDirect

The 60 year history of US nominal GDP growth and bond yields shown here is one of the clearest guides to the medium term direction of interest rates. In the first 20 years, bond yields were chasing growth rates. They caught up during the early 1980s and changed the direction of markets for the next 30 years. Several conclusions are evident from the chart. Rising yields are not incompatible with rising GDP values. Very high yields are likely to eventually strangle GDP growth but current yields are not especially out of line with where growth sits presently. With optimal anticipated growth of around 5% (and, in practice, something possibly lower) the prospects for a 1950s or 1980s style directional shift appear remote.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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