Worried About the Market? 5 Big Risks and How to Hedge Them.

Sure, the rally is heading into its fourth year, but that is only because the Federal Reserve is ignoring inflation risks and cutting interest rates. With the overall U.S. debt level topping $37 trillion, the highest on record, and careening at a pace that will take it to $50 trillion by the middle of the next decade, investors are starting to question whether dictum meum pactum (“my word is my bond”) is truly the case when it comes to U.S. Treasury bonds. If investors demand a higher return for holding longer-dated bonds, that will mean higher borrowing costs for the government and falling prices on already issued bonds, because bond prices move inversely to rates.

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