The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 42

There Seems to Be a Bond Between These Yields

As with the last chart, here you see the synchronous movements of financial events in different countries. This time you see them for interest rates and dividend yields, and how they are tied together in four European countries. Look at interest rates. These are for long-term government bonds—the highest-quality available in those countries. The rates moved up and down simultaneously in the different countries. There seems to be a bond between them. In 1957, interest rates peaked in all the countries but the United Kingdom. They rose very little thereafter in the United Kingdom. Rates then fell until 1959, when they established a simultaneous bottom in all four of the countries.

There are some variations, however. The 1960–1962 period shows some jiggle. Germany and the United Kingdom acted similarly, but differently than Belgium and the Netherlands. But then, starting in 1963, they move almost in lock-step again. And if that doesn't convince you, look at the dividend yields on stocks. Except when Germany's dividend yields peaked out a year before the other three in 1958, and the Netherlands didn't rise in 1960, and Belgium didn't in 1961, the yields in these countries look like mirror images of each other from year to year.

The message here is no different from the others that point out the intertwined nature of most major economies. But you can see some simple lessons in these charts that are case studies on this theme to ...