Alessandra Tarantino/AP Photo
- Bank of America charted the historical path of interest rates last week.
- Central banks have lifted borrowing costs away from "5,000-year lows" over the past year, strategists said.
- Today's investors probably won't learn much from the bank's latest graph.
Just like the men of TikTok, Bank of America strategists have been thinking a lot about the Roman Empire.
For reasons unknown, the bank decided to chart five millennia's worth of interest rates in a recent research note.
Rising borrowing costs have been one of the major forces driving markets over the past 18 months, with central banks across the world tightening aggressively in a bid to clamp down on inflation.
Most traders think the US Federal Reserve's war on soaring prices is nearly over – but if there's anything to be learnt from history, they're wrong:
Bank of America
The bank cites Sidney Homer and Richard Sylla's "A History of Interest Rates", which chronicles rates from the Late Bronze Age, ancient Greece, and Roman Empire through to the 20th century.
The chart shows that the Mesopotamians, Romans, and Victorians had to contend with the highest borrowing costs – while recent hikes have merely lifted rates away from "5,000-year lows," a team led by investment strategist Michael Hartnett said Friday.
"That means [the] end of abnormally high bond and equity returns," they added, noting that the 5% yields that are spooking Wall Street right now have been pretty normal over the past 250 years.
(The bank did leave around 4,100 years of history unaccounted for, calling into question its claim that pandemic-era rates were the lowest they've ever been.)
Needless to say, investors can probably take the chart with a grain of salt – but the strategists probably aren't being facetious when they say there are gloomy times ahead.
Hartnett was one of the few Wall Street analysts who predicted that stocks would have an awful 2022 – and he's remained pessimistic ever since, warning in a recent research note that surging oil prices, the rampant US dollar, and further Fed rate hikes could still drag down the US economy.
His team doesn't tend to base its predictions on 5,000-year old data – but a little history lesson never hurt anyone, either.