How safe assets became investors' biggest risk

Markets are weird right now. The value of risk-free assets has gone all out of whack, and if that doesn't seem scary, keep reading.

Since the 2008 financial crisis, the real (inflation-adjusted) risk-free rate has been consistently negative, and now it's even more so. Foto: AP/Richard Drew

Sri Lanka is facing a debt crisis, and yet its stock market is up more than 60% in the last year. The Federal Reserve is getting ready to hike rates to combat inflation, and the higher interest rates move the lower stock prices should be. The S&P 500 may be down the last few weeks, but it's still up more than 20% for the last 12 months.

Rate increases in America are especially treacherous for emerging markets, which face additional headwinds, and yet emerging-market funds are up 25% from before the pandemic. Yields for low-quality BBB bonds are less than inflation. And now celebrities can't stop talking about investing in cryptocurrencies...

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