For over a decade Wall Street has been repeating that ‘There Is No Alternative’ (TINA) to equities, but this year for the first time Wall Street suggest ‘There Are Reasonable Alternatives’ (TARA). There is one reason for this significant shift in narrative – real yields came back.
Real yield is a difference between the nominal interest rate and the inflation rate (expected or actual).
From return perspective, real yield reflects impact of the risk free rate on purchasing power. If it’s positive investors are able to grow their purchasing power without taking on risk.
From a time perspective, real yield represents the rate of time-preference of a borrower and lender ot preference for current goods over future goods
…. Pending …