In the twinkling of an eye, volatility has suddenly returned to world stock markets, impacting on Australian shares, with the ASX 200 in danger of slipping back below 6,000.
While you could blame trade wars, elevated valuations and that we are overdue a stock market correction, the real reason markets are falling is because the return on risk-free assets is looking attractive again.
Specifically, I’m talking about the yield on US 10-year bonds. Right now, you can buy US government bonds and earn around 3.2 per cent on you money, virtually risk-free.
That 3.2 per cent return looks attractive when compared to investing in shares, which is the alternative.