Retirement investing used to be easy

Save money, park it in interest-bearing instruments, and live off the income, with Social Security and maybe a job pension to help. Not complicated and it worked well for decades.

This chart shows the spread between 10-year Treasury yields and 30-year mortgage rates.

I noted last week that the long-lost “bond vigilantes” are trying to rise from the dead. 

I firmly believe that at some point the Federal Reserve will begin to buy large quantities of longer-dated securities, taking interest rates down and driving a stake into the heart of those who want higher returns for the risks they are taking. 

That point is likely when the market drops (say) 20%. Until then they just let things rock along. The Federal Reserve is going to give us return-free risk.

I reviewed stock valuations in more detail a few weeks ago (see here) and everything I said then still applies. Anyone who owns passive index funds will endure a major drawdown at some point. 

I can’t say exactly when but it’s going to hurt.

John Mauldin 5 March 2021

Nice, sort of, pic of  Fed Chair Jerome Powell

https://www.mauldineconomics.com/frontlinethoughts/everything-is-broken