The Purge of the Zombie Economy: Treasuries and the Euro's Looming Crisis
In the midst of global economic metamorphosis, the past's safe havens no longer stand unshaken.
Take US treasuries: once steadfast, now as volatile as stocks. Their historical stability? Undermined, with a 50% drop in 1920, 1948, and 1981 — years that defined geopolitical and financial turmoil.
With surging interest rates, fixed income's allure is eroding. Every portfolio manager must ask: how will these assets fare in three years? It’s high time to discern companies capable of weathering soaring interest rates and geopolitical turbulence.
German Treasuries (X03G.DE) and US Treasuries ETF (TLT) drawdowns.
"Conservative" investing has been redefined. Those classic 80% bond and 20% stock portfolios? Their guarantees have faded. Even Ray Dalio's all-weather strategy now stands questioned.
Labelled the "zombie zone" due to prolonged negative interest rates, the Eurozone's narrative is changing. But it's not just the Eurozone’s 2.4% German bond or 4.1% Italian rates we should watch. Currency crises aren't reserved for nations like Argentina or Turkey. History reminds us: Germany has reshaped its currency six times in a century.
Now, with the treasuries' dip and the strengthened dollar amplifying pressure on indebted entities, is the Eurozone teetering on crisis? While the "zombie economy" shows signs of decay, a leaner, productivity-centric economy is emerging, poised to drive global growth.
Sincerely yours,
Guillermo Valencia A