Asset prices move in waves. Ever since the great depression of the 1930s, the equity markets have risen in bullish waves that tend to last 7 to 9 years then selloff in a sharp fall that usually erases 1/3 to 2/3ds of the previous gains. Those sell-offs tend to last 1 or 2 years. The bond market undergoes waves that last much longer. The current bond market rally started in 1981 and probably ended last year. Unlike the stock market, the rise and fall in interest rates are more symmetrical. The great bond bear market started sometime in the 1940s after the great depression ended. It lasted for 35 to 40 years. By the end of that phase, market commentators called bonds "certificates of confiscation" as the rising rates caused bond prices to fall. To add insult to injury, inflation plus income taxes assured the owner lost purchasing power, even though they may be collecting a yield of 10% or more. This is the perfect psychology for a change in directions.
