3 ms·
That's right, because cash is money now, bonds is money later. If inflation is high I'd rather have $100 now than $100 later. Of course, real decisions are mad
by fwdpropaganda 9y ago
That's right, because cash is money now, bonds is money later. If inflation is high I'd rather have $100 now than $100 later.
Of course, real decisions are made on figures. The actual way of making this decision would be to compare the bond yield with the expected inflation. If expected inflation is higher than the bonds yields I'm going to sell my bonds for cash and so will a lot of people, so the bonds price will drop and the yields will raise until a point where they're attractive again.
But yes, it is hard.
- rmrm 9y agoProjecting bonds being down/increasing yields isnt surprising in any way in inflationary environment. The harder thing to get around is stocks, which should outperform cash in an inflationary environment. To me it just shows that there are many dependencies, and it is not always simple to project an outcome or response for a given class to an event.