Oliver's Insights – The Fed, interest rates and bonds

Key points

• The US Federal Reserve (“Fed”) looks on track to start slowing its quantitative easing (“QE”) program later this year, but only if the economy continues to improve. More importantly, it’s unlikely to raise interest rates any time soon.
• This suggests a 1994-style bond crash remains unlikely for now. However, bond returns are still likely to remain poor as yields gradually rise to more normal levels.
• Shares are vulnerable to sharp rises in bond yields, but they offer much better value relative to bonds.

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