The 30-year US Treasury bond tells us that the expected return over the next 30 years is a real return of 0.4 percent (2.8% yield minus a break-even inflation of 2.4%).. This cannot last in a world of forced inflation via infinite monetary printing and a possible downgrade of the US - if we fail to get structural fiscal reforms. The Federal Reserve is expected to keep rates low for longer but in 2013 this could be challenged by the zero interest rate policy which forces investors to leave fixed income to attain any yield. The global bond markets is USD 157 trillion versus a stock market valuation of USD 55 trillion (Source: Mapping global capital markets 2011 - McKinsey & Company). This means that for every one dollar in equity there are three in fixed income. With no return or even negative return (after costs) the substitution of bonds with stocks is appealing. For every 10 percent the mutual funds reduce their bond weightings the equity market will see 30 percent on net
inflow – this could not only lead to higher US rates, but also be the beginning of decade-long outperformance by stocks over bonds, which is long overdue.

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