With more than $15-trillion of bonds now offering negative yields and US Treasuries now well below 2% and possibly heading for zero, bond market investors are facing tricky times. Their future investment experience hinges on whether governments lead the global economy into a worst-case or best-case scenario - something over which they have no control.
In today's tweet-driven financial markets, investors are fast having to learn how to invest in a world of binary outcomes. One day US-China trade negotiations are on track, the next a trade war between them is imminent. One day the US Federal Reserve is expected to go slow on reducing interest rates, the next some three interest rate cuts are expected to occur before the end of the year.
With financial market conditions prone to such extreme about-turns, it is virtually impossible to predict - and thus prepare for - even the near-term future. The only thing investors can do is brace themselves for surprise eventualities.
This is particularly the case in the bond market, where government bonds are susceptible to macro trends, including monetary policy shifts, the state of government finances and geopolitical tensions.
In the wake of the sharp escalation in trade tensions...