Indeed, many prominent institutional fixed-income managers were destroyed by the unanticipated rise in inflation and interest rates during the late 1970s and early 1980s. After all, the highest interest rates in US history (at least up to that point) looked quite enticing to anyone operating with the old mean-reversion “anchor.” The problem was that interest rates kept moving ever higher for several years in the worst bond bear market in US history to the dismay of investors who got in years too early in anticipation of an imminent mean reversion.
The issue withchasing mean reversion on a trending asset
