Throughout 2010 financial markets have reflected a strange confluence of views. Government-bond yields have been low (outside peripheral Europe), indicating that investors are expecting low inflation and slow economic growth. But gold, an inflation hedge, has risen steadily, while American equities, a play on growth, have performed well. This threefold combination cannot last for ever. That it has persisted for so long is probably down to the Federal Reserve's quantitative easing (qe), which gave comfort to bulls in all three asset classes. The gold bugs saw qe as inflationary, equity enthusiasts saw the tactic as boosting growth and the bond markets had the comfort that the Fed would be the "buyer of last resort" for Treasuries.
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