Around the world,Ā central banksĀ are aggressively raising rates in an attempt to battle persistent and stubborn inflation whileĀ bondĀ prices are slowly trending down. The pandemic was followed up by theĀ Russian invasion of UkraineĀ and topped off by anĀ energy crisis in Europe and rising global inflation.Ā
As global bonds lost another $1.2 trillion in value over the past week, Weltās Holger Zschaepitz took toĀ TwitterĀ on September 25 to proclaim the bursting of the bond bubble as the total losses of bonds exceeded $12.2 trillion.Ā
āLooks like the bond market bubble has burst. The value of global bonds has plunged by another $1.2tn this week, bringing the total loss from ATH to $12.2tn.āĀ
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Catching up to the Fed
InvestorsĀ are nursing large losses as theyāre trying to catch up to the US Federal Reserve (Fed) outlook on rates, which seem to indicate another round of aggressive interest rate hikes. These moves have forced currency traders to prop up the US dollar, actively forcing a run out of other assets.Ā
Meanwhile, CaxtonFX chief strategist Michael BrownĀ statedĀ that besides the Fedās strategy, everything else in the market is simply noise at this point, as he expects the sell-off to continue.Ā
āThe Fedās message on Wednesday was clear, that rates are going higher than the market was pricing, and policy will remain restrictive for a prolonged time to come, likely throughout 2023 ā in that environment, itās almost impossible to be long stocks, or to want to buy Treasuries; hence the sell-off in both is no surprise, and should continue.ā
Bleak outlook
Famous macro investors like Ray Dalio and Stanley Druckenmiller have been warning for some time of broader markets taking a plunge due to global macro stress, and in a way, their calls are being vindicated at the moment.Ā
Across the globe, the growth outlook seems bleak, and market participants would be best served by patience and vigilance in a potentially protractedĀ bear market.Ā