10 Oct 1987 vs now – rising bond yields (& war in Israel) and the risks for shares
Key Points:
- The rise in bond yields has left shares offering a low risk premium over bonds leaving them at risk of more softness.
- The conflict in Israel has added to the risk, although the threat should be minimal if Iran is not drawn in avoiding a severe impact on oil supplies.
- There are parallels with the run up in bond yields prior to the 1987 crash but relative valuations are less threatening.
- Still falling inflation should take pressure off central banks next year, which should in turn be positive for shares.