6 October 1979: Volcker's Saturday Night Special
In an unusual Saturday announcement, Fed chairman Paul Volcker said the central bank would target the money supply and let interest rates go wherever they had to. Rates soared, eventually topping 20 percent, and a painful recession followed. But inflation was broken, setting the stage for a decades-long fall in interest rates and one of the greatest bond and stock bull markets in history.
The lesson: Short-term pain from fixing a real problem often buys decades of gain.
What it meant for investors
$1,000 in US Treasury bonds at the start of 1990 → $5,200 today, vs $19,429 in the S&P 500.
We start the clock at the start of 1990, the first year in our price data after the event. That is 5.2 times the money, but $14,229 less than a plain index fund made over the same years.
What US Treasury bonds teaches: Bonds bought at very low yields carry real price risk, because the starting yield is the best guide to future bond returns.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 1990 | $100 | $5,200 | $19,429 |
| 1995 | $150 | $3,467 | $14,783 |
| 2000 | $215 | $2,419 | $4,626 |
green = beat the S&P 500 · red = lost money
What if you bought US Treasury bonds? Every starting year and the full story →
More US Treasury bonds history
- 4 February 1994: The Fed starts the great bond massacre
- 18 March 2009: The Fed fires its bazooka
- 15 June 2022: The Fed hikes 75 basis points
- 5 August 2011: S&P strips the US of its AAA rating
- 27 August 2020: The Fed changes how it targets inflation
- 3 November 2010: The Fed launches QE2
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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