The U.S. is Ripe for Bubbles in Stocks and Real Estate

The American economy is relatively strong, making its assets more attractive to foreigners

by Cullen Roche
Market Watch

The greatest bull market in the history of markets keeps chugging along, as long-term bond yields continue their perpetual slide. As of Wednesday, the yield on the benchmark 10-year Treasury note was a mere 1.38%.

This is a bit confusing for some people because the U.S. economy seems to be in relatively good shape. Gross domestic product in the second quarter is expected to increase 2.4%, wages are growing at 3.4%, the ISM non-manufacturing number just came in at 56.5, jobless claims are at 40-year lows. Yeah, there are some worrisome trends out there, but the broader picture doesn’t seem to mesh with such low interest rates.

If we step back and look a the global picture, it all starts to make more sense. The U.S. bond market is stuck in a global vortex of 0% rates. Thanks to weak growth in China, Europe and Japan, global central banks have cut rates in an effort to spur growth.

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