What are the odds that bond rates are going to return to the 2010s normal? Low, although at least some mean-reversion seems highly likely, plus in the future rates are likely to be lower on average...
My guess is that markets think that growth and inflation revert to pre-GFC levels. BUT there's also a lot of momentum trading on the long-end of the curve which may not be around in 6-months, and could easily reverse. In the short run, a hell of a lot of securities market prices are trades, not investments.
All points well taken. However, could your third "perhaps-sensible" argument be rendered "sensible" by what is going on (mostly incipient, still) with American manufacturing? Given constraints on the labor input, might that not lift the K/L ratio in a way that raises, at least, the non-steady state productivity and economic growth rates by a few tenths of a percentage points? I understand that the outcome is still up in the air, and we may not know the marginal product of capital until we see it. But given what we've been seeing on that front so far is unlike what we've seen in a very, very long time, it may yet deliver the goodies (but don't know when).
Great piece. Brad would suggest one more factor, the workforce is shrinking relative to the economy (as baby boomers retire domestically) and demographics roll over globally. Implies more capital-intensive investment in robots. For example, "...South Korea leads the pack in using robots for manufacturing, using 10 human manufacturers for each industrial robot. But the U.S., Japan, China and Europe use between 25 to 1 and 40 to 1. Elon Musk believes the ratio should be even...."
My guess is that markets think that growth and inflation revert to pre-GFC levels. BUT there's also a lot of momentum trading on the long-end of the curve which may not be around in 6-months, and could easily reverse. In the short run, a hell of a lot of securities market prices are trades, not investments.
All points well taken. However, could your third "perhaps-sensible" argument be rendered "sensible" by what is going on (mostly incipient, still) with American manufacturing? Given constraints on the labor input, might that not lift the K/L ratio in a way that raises, at least, the non-steady state productivity and economic growth rates by a few tenths of a percentage points? I understand that the outcome is still up in the air, and we may not know the marginal product of capital until we see it. But given what we've been seeing on that front so far is unlike what we've seen in a very, very long time, it may yet deliver the goodies (but don't know when).
Great piece. Brad would suggest one more factor, the workforce is shrinking relative to the economy (as baby boomers retire domestically) and demographics roll over globally. Implies more capital-intensive investment in robots. For example, "...South Korea leads the pack in using robots for manufacturing, using 10 human manufacturers for each industrial robot. But the U.S., Japan, China and Europe use between 25 to 1 and 40 to 1. Elon Musk believes the ratio should be even...."