Rating the Rate of Rerating of Rates

What is “normal” in financial markets? Our latest Sound Thinking from CIO Ian Toner provides a unique perspective on how investors can think about characteristics of the market that are considered normal. Ian applies this to one of the most recent examples of what is normal – interest rates.

The question that has been routinely asked is, “when will interest rates return to normal”?

• There have been few more consistent trends in financial markets than falling interest rates from 1981 to 2013
• The removal of hyperinflationary pressures was a key to this trend, which was supported by the computing revolution and the rise of emerging markets
• After the market crash in 2008, central banks threw open their vaults, expanded their balance sheets, and pushed interest rates to all-time lows
• As a consequence of extraordinary monetary policy, inflation hawks have predicted an abrupt end to the low inflation and interest rate environment

Please note that the link to the podcast is a shortened presentation of the attached article. All references in the podcast to material events or market information are noted with citations in the attached article entitled ‘Rating the Rate of Rerating of Rates’.

• Sound Thinking: Rating the Rate of Rerating of Rates (PDF)