Big changes rocking Wall Street conceal an inconvenient truth: It's a return to normal
It’s easy to get swept up by Wall Street's hullabaloo over high interest rates, rising Treasury yields and other superlatives about financial markets
NEW YORK — It's easy to get swept up in all the superlatives popping up about investing and financial markets.
The 10-year Treasury yield is at its highest level since 2007! The Federal Reserve has hiked its main interest rate to the highest level since 2001! Bond funds are on track for one of their worst years in decades!
Diminished in all the hullabaloo is that conditions in financial markets are actually reverting to historical norms, not diverging from them.
To be sure, the speed at which interest rates have snapped higher since the spring is jarring. But the 10-year yield is still lower than it was for roughly three decades, from the late 1960s through the late 1990s.
Rather than think of today's conditions as strange, it's perhaps easier to think of the last few decades as the anomaly. Ever since the ghoul of high inflation was broken in the 1980s, the Federal Reserve has been quick to aid the economy and financial markets during times of trouble.
That meant if lots of layoffs were happening or if the stock market was tumbling too frightfully, the Fed could cut interest rates down to zero. If that wasn't enough, the Fed could keep going with unconventional programs, such as purchasing however many bonds it thought was necessary to keep financial conditions easy. The Fed could do all that because inflation for a long, long time simply wasn't a problem.
Now it is. And that means the Federal Reserve doesn't have the same freedom to cut rates so quickly, because lower rates can give inflation more fuel.
After decades when changes like the internet and off-shoring
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