Co-CIO Karen Karniol-Tambour describes how bond yields still need to rise to set a price of capital that is sustainable for the world we’re in now. Read more: https://lnkd.in/dwxeGmCr
We’re in the midst of a transition to a higher cost of capital, high enough to compensate for the desire of business & government to spend on inherently inflationary things: AI (near-term inflationary), remilitarization, energy transition, energy security, and the rebuilding of the industrial base to be less reliant on China. That means structurally higher fiscal stimulation, and an environment where small increases in the cost of capital probably won’t do much to slow the economy. Some reflections on this process of transition below.