These are the stories that convince me that the Fed’s policy of easy money will eventually come home to roost. China’s economy is changing just as much as ours.
Rising wages will result in higher global inflation and will trigger a giant global margin squeeze in the medium-term and the top of the Treasury market in the long-term.
I view recent upward movements in Treasury yields as buying opportunities. Consumers’ purchasing power remains weak. Any increase in prices on the commodity/raw material side will be met with anemic debt plagued consumer demand. Companies have the most to lose here as their historically very high profit margins are at serious risk of mean reverting.
Wage dynamics also alert me of the risk of sticky inflation. Stagflation will be a problem for emerging market economies for the foreseeable future in my view.