I wonder when interest rates will begin to rise?
You had a window of a few days in march, that's how long the last credit cycle lasted (IG corporate bonds, that is). Investment-grade bond spreads blew out from around 1% to 4%.
There is no law stating interest rates eventually will have to rise. They haven't in Japan for an awful long time, for example. In nominal terms US yields are still among the highest out there, 10y US govvies yield just south of 1% compared to say 0% in Japan and -0.50% or so in Germany. 10y US TIPS yield around -1% at mom 2%.
The central banks have also showed their hand imo, they will do pretty much anything to prevent asset prices from crashing. If they will succeed is another story.
To ask the question a different way, how long can the USD remain the world's reserve currency, propped up by demand from foreign countries and industries who transact in dollars. The US has been funding itself in large part through borrowing because there was such insatiable demand for USD from China, worldwide commodity traders, criminals, debtor nations, and wealthy investors across the world. To be clear, without foreign demand for dollars constantly sucking cash out of the US economy, inflation would be double-digit and the American standard of living would be closer to Mexico's or Russia's. Or, if American taxes, rather than money-printing, had to cover the entire cost of government, US potential GDP growth would be zero or below. The US is in a sweet spot where the rest of the world partially funds it.
The stated goal of the fed is to control inflation while maximizing employment, but to accomplish this the fed must incentivize funds to flow into investments instead of consumption. At a discount rate near zero, the math says any investment yield is worth buying, and so we have the everything bubble covering bonds, stocks, real estate, and more.
Trillions of dollars worth of assets on the fed's balance sheet could be sold at the first whiff of inflation, so there is little risk of persistent inflation and little need for the fed to raise interest rates even if it does happen. The low risk of inflation for at least the next several years further supports the value of the dollar compared to other currencies where purchasing power could erode faster. The US' ability to print money instead of charging taxes also makes the US an attractive investment destination in a virtuous cycle. Additionally, the risk of deflation is low because the fed can just again do what they did in 2009 and 2020 - create billions of dollars and buy up investment assets to distribute those dollars.
However, the fed put on inflation DOES NOT prevent the bursting of asset bubbles. It also does not set the price of the dollar versus other currencies, where interest rates are the more important factor. The stock market could still melt down 40+% as it did in 2000, another time of exuberance and unprecedented valuations. Similarly, the dollar could lose another 10% against a basket of international currencies, as it did in 2020.
But the bigger threat comes from cryptocurrencies. Foreign investors, merchants, and governments know they are subsidizing Americans by propping up the dollar, and a stable crypto platform, or a national digital currency like China is about to launch, could break their dependency on the US as the world's monopolistic reserve currency supplier. From the perspective of American investors, the USD is the only asset that matters.