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Inflation, high bond yields: The 2020s are eerily like the 1920s. Are investors in for a long haul?

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A crowd of investors gather in front of the New York Stock Exchange after the Wall Street crash in 1929.

Synopsis

The current crisis has a spooky resemblance to the monetary policy of 1920, which resulted in a boom-and-bust cycle. Dow’s movement from 2008-2022 looks similar to 1916-1930. And the Federal Reserve is caught in the same situation. The US and Indian equity markets have a very high correlation, especially in times of stress. Should investors revamp their asset allocation?

“Policymakers have no endgame, markets do.” In 2016, American investor Stanley Druckenmiller was speaking to a room of nearly 3,000 investors at the Sohn Investment Conference. His message was that policymakers have no “end game” for the ending years of ultra-easy monetary policy. “They stumble from one short-term fiscal or monetary stimulus to the next despite overwhelming evidence that they only produce a sugar high and grow unproductive debt

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