Far too many people don’t realize that the bond market dwarfs the stock market in size. And if bonds crash, it doesn’t bode well for stocks.
So, what’s happening in the bond markets…besides rates creeping up?
People are freaking out that interest rates are skyrocketing and believe that the FED needs to lower rates to save America.
But contrary to popular belief, there has never been a time in history when lowering interest rates have worked favorably for the long-term.
And for those who have been around for a while remember how in 1981, interest rates skyrocketed and peaked in 1981 at 16%.
If there ever was a no-brainer, this was it.
Buy 10-year Treasuries and collect 16% virtually risk-free.
It was a perfect scenario for savers.
Unfortunately, it’s been downhill ever since.
And although it took 40 years to bottom, it was the biggest decline in history with the 10-year paying 0.53% in 2021.
Do the math…
If you invested $10,000 in 1981 your return would’ve been $1,600. And in 2021, that same $10,000 return would have been $53. Today, the same investment gives you $528.
It’s nowhere near $1,600 but it’s approximately 10 times more than 5 years ago.
But the reality is you are earning 67% less on your money in bonds than back in 1981…and that doesn’t include inflation.
So, what’s dangerous about this and why?
Global debt has now surpassed $365 TRILLION after increasing by more than $10 trillion during the first half of 2026.
The problem is no longer merely the amount of debt.
Because Governments accumulated enormous liabilities during an era when interest rates were artificially suppressed.
And they became accustomed to refinancing those obligations at virtually no cost.
That era is ending…and the bond market is beginning to demand a real return for financing governments that have absolutely no intention of balancing their budgets.
