High stock valuation levels can mean lower expected stock returns, and low bond yields usually point to
lower future bond returns.
In fact, if you look back at the historical returns on bonds over the years there is a direct correlation between interest rates and
future bond returns.
The best you can say is that
future bond returns, with a starting yield of 2.5 %, is going to be less than it was 30 years ago when rates were double digits.
As a result,
future bond returns are likely to be driven more by income and less by price appreciation.
As a result,
future bond returns are likely to be driven more by income and less by price appreciation.
The market is really worried about rising interest rates, but this is actually a minor issue when it comes to
future bond returns.