You don’t have to squint too hard these days to see the cracks in the old economic playbook. Inflation won’t sit down. The 60/40 portfolio isn’t saving anyone. And let’s be honest — those soothing whispers about "transitory" and "soft landings"? Yeah, those aged like milk.
Henry Neville, CFA and Portfolio Manager at Man Group, just dropped a research note that doesn’t politely suggest change is coming — it declares that the era of secular stagnation is flatlining, and the signs are right in front of us. In ““Signs of the Times: Five Indicators of Regime Change,1” Neville doesn’t wax poetic about macro theory. He delivers five real, observable market signals that are screaming, “Buckle up.”
And he kicks it off with a nod to Bob Dylan, because apparently even portfolio managers can’t resist a good prophecy.
Welcome to “Secular Reflation” — or Whatever We’re Calling This Mess
Neville doesn’t love the term “reflation,” but he’s sticking with it for now. Why? Because we’re clearly not in Kansas (or the 2010s) anymore. He points out that for nearly 40 years — from 1981 to 2020 — rates steadily dropped. It made saving pointless and borrowing irresistible. And it helped shape a weird world where sluggish growth felt… normal.
But this new world? Not so much.
“This made saving less attractive, and investment more so,” he explains. That balance worked when the globe was flush with savings and starving for projects. Now, between aging populations, massive infrastructure needs, and a growing appetite for fiscal intervention, Neville argues we’re shifting to a world where capital is scarce — and the cost of money is going to stay higher, for longer.
1. The Stock-Bond Correlation Flip
Remember when bonds saved your portfolio every time equities crashed? Those were the days.
Neville highlights that the “historical aberration that was the negative stock-bond correlation” officially died in August 2022. Today, the U.S. measure is at its highest since December 2000.
In plain English: stocks and bonds now often move in the same direction — and that direction can be ugly. So if your risk management strategy still leans on that old inverse correlation, it might be time to get reacquainted with volatility.
2. Gold Doesn’t Care About Real Yields Anymore
Traditionally, when real yields go up, gold gets punched in the face. After all, “gold yields nothing,” Neville reminds us. In fact, owning it actually costs you.
But since 2022? That playbook’s toast. Real yields have surged, but gold? It’s been rising too.
Neville suggests gold is now behaving more like “crisis alpha” or a “fiat alternative.” In a world increasingly fractured — politically, economically, and monetarily — gold’s value isn’t being determined by spreadsheets. It’s being driven by trust, or lack thereof, in paper money.
3. The “New Regime” Sectors Are Still on the Bench
You’d think sectors like defense, oil and gas services, automation, Japanese industrials, and gold miners — the supposed stars of the new era — would be priced for takeoff.
They’re not.
Neville notes: “On average, the five trade on their 51st percentile multiple versus history.” Only defense has made a meaningful break higher.
It’s like the market hasn’t gotten the memo yet. Or maybe it has… and it’s waiting for more confirmation. Either way, Neville’s message is clear: if these are the sectors of the future, someone forgot to tell the price charts.
4. Treasuries Are Losing Their “Privilege Discount”
Here’s the sacred myth: the U.S. can borrow on the cheap because its bonds are the global safe haven. But what if that myth is unraveling?
Neville crunches the numbers and shows the spread between actual 10-year Treasury yields and their theoretical “fair value” — based on trend growth, inflation expectations, and term premium — is now the “lowest decade spread since the 1960s.”
Worse yet, from May 2023 to July 2024, the gap stayed below 100 basis points for 15 straight months — a record-breaking stretch.
This isn’t a blip. It’s a sign the world may be losing its appetite for Treasuries, or at least isn’t willing to subsidize them at the same discount. If that trend sticks, funding future U.S. deficits could get a lot more expensive.
5. Inflation Breaks Everything — Including Multiples
Neville pulls no punches here. He ties inflation to correlation and valuation like a grim little knot.
- When inflation is under 3%, stock-bond correlation is negative 71% of the time.
- Above 3%? It’s negative just 2% of the time.
- Below 5% inflation, the median equity multiple is 18x.
- Above 5%? That drops to 10x.
Now for the kicker: the 2020s are running at over 4% inflation, “the highest decade number since the 1980s.” Yet, the median multiple is 24x — higher than any other decade.
Translation: markets are floating on hope and inertia. And that doesn’t end well when inflation refuses to play nice.
Neville’s Mic Drop: “You Better Start Swimmin’…”
He closes with a flashback to Seymour Durst’s famous debt clock. Back in 1989, it showed a 57% debt-to-GDP ratio. Today? 123%. Debt per taxpayer? Up from $35,000 to $323,000.
Neville’s conclusion is blunt: “The reckoning is surely coming… but as with everything in this ephemeral industry of ours, long and variable lags.”
His final warning: the five indicators he outlined won’t tell you when the shift hits — but they’ll light up before it does. Some already have.
So if you're still swimming like it's 2015, you might want to check where the tide’s pulling you.
Footnote:
1 "The Road Ahead - Signs of the Times: Five Indicators of Regime Change | Man Group." 30 May 2025.
