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Thursday, June 20th, 2013
thirty years

13 0620 thirty years

It was thirty years ago today . . . when I started my investment career.

I selected this chart to represent the whole period because I think that the most important factor at work in the markets was the persistent decline in interest rates illustrated in the top panel.

The middle panel shows the relative returns of the long bond versus stocks.  You can walk through three decades of history in that one chart:  The dislocations of 1987, the stock boom that ended in 1999, and the financial crisis.  Each of the periods returned to the zero line and after all of that time the two assets finished in a dead heat.

For the whole first part of the bottom panel — other than that bit of unpleasantness in 1987 — stocks and bonds were positively correlated.  (These are 52-week rolling correlations.)  So, when I hear folks talk about the negative correlations of late between the two like it’s the natural order of things, I realize I have been around long enough to know that our perceptions of “the natural order of things” are subject to change.

The big question of the day is whether we are finally headed in the other direction, in rates and perhaps in correlations.  I’ll let you know in thirty years how it comes out.

Thank you to my clients and readers and co-workers and students and everyone else that has made this a most interesting period to be in this profession.  My consulting and writing is built upon the experiences I had with you and the things I learned along the way.  (Chart:  Bloomberg terminal.)