Can the U.S. Avoid a Recession?

What if interest rates never rise? I have recently turned somewhat more bearish on bonds, thinking that a move mildly higher is much more likely than a return to 10-year notes at 1.60%. But thinking longer term, there is definitely a scenario where interest rates stay in their current range for five or more years. In fact, I believe there are only two scenarios in which rates rise substantially over the next few years.

Consider the following simple facts. In the post-war period, the U.S. has had a recession every five to eight years. Currently, most expect the Fed to start raising their target rate sometime in 2015. By that time, we will be six years removed from the 2009 recession. In other words, right about the time when historic norms would suggest a new recession will be arriving. I don't have any specific reason to believe that we'll have a recession in that five-to-eight-year time frame, but this does set the stage for the conversation. In order for rates to be materially higher sometime in the next few years, we have to avoid another recession....569 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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