The recent jump in government bond yields may or may not prove durable, but it prompts a wider question. Interest rates have been falling globally for 30 years. Sooner or later, they are going to start rising again. How might this affect business and investment behaviour?

That would depend on what caused it: a revival of inflation, say, or a shift in the balance between savings and investment. The latter is proposed in a paper from McKinsey, which argues that over the next two decades investment demand from China and other big emerging economies will outstrip global savings.

We need not dwell on the details of this, since it is not in the nature of 20-year economic scenarios to be strictly accurate. It serves rather as a handy framework for thinking through the consequences.

Let us begin by setting the inflation/deflation debate on one side, and taking instead the McKinsey hypothesis that interest rates will rise in real terms. What would that mean for investment strategy?

McKinsey argues it would be good for bonds and bad for equities. This seems paradoxical, since it would mean both asset classes behaving in the same way when rates rose as when they fell.

Still, the argument is a long-term one. The attraction of bonds in the new world, it is claimed, would simply be their superior yield. But getting there would involve a steep fall in the value of existing bonds. If that dragged on for long enough, investors might form the same settled prejudice against bonds as they have now against equities.

David Fuller's view Indeed! To extrapolate accurately the prior 30-year trend of falling interest rates into the next two decades would require the economic equivalent of a nuclear winter. Most of us are more optimistic than that, in which case interest rates have a long way to rise, culminating in eventual revulsion towards government bonds before we rediscover that they have once again become good long-term investments for the next disinflation.

The subtlety in analysis for investors concerns the number, extent and duration of countertrend reactions within the secular trend. Our best chance of recognising these in a timely manner, I suggest, is with the help of price charts, viewed in the manner of a naturalist observing the herd.

I feel justified in forecasting a secular uptrend for long-dated US Treasury Bond yields because they arguably represent the biggest bubble in the last decade which has yet to burst, although the initial leaks are appearing. Note the significantly higher low on the US 30-year T-Bond Yield (historic monthly, weekly & daily), the importance of which will be confirmed by a sustained break above the June 2009 and April 2010 highs near 4.86%, plus the psychological 5% level. I just hope that there is enough QE in the Fed's monetary arsenal available for long-dated issues for me to establish more T-Bond futures shorts without having to chase.

Tony Jackson's article also touches on other Fullermoney secular themes. I note the caution on commodities. Although often cyclical in performance, they too can have secular trends as we have seen with precious metals and some other significant gainers over the last decade. If human ingenuity and the luck of good weather prevent some significant commodity bubbles in the next few years, the world will be fortunate indeed.