Past is Prologue

William Shakespeare famously quipped “What Is Past Is Prologue.”? Success in most endeavors, including investment markets, requires an understanding of historical antecedents and learning from their implications for the future. Many know the phrase “Those who fail to learn from history are destined to repeat it.”? We prefer to apply what has come before to improve the probability of success and reduce the chances of failure. “This time is different” remain the four most dangerous words in investing. History, through statistical data, may improve opportunity as well as help to avoid disaster.

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If the past were always prologue, what fun would that be? Below, we illustrate a chart that defied the Past Is Prologue mantra. The current Federal Reserve interest rate pause did not reward investors in long duration fixed income as history predicted:?

History indicated that long duration bonds would increase in value 6-months after a Fed pause. That did not happen. We can speculate that expectations of heavy treasury issuance to finance the large budget deficits or fears that the 2024 fiscal spending wave might reignite inflation may have given long bond investors pause about lengthening duration. Regardless, we acknowledge the rare result this unprecedented loss presents.