Often, the response to macroeconomic trends will cause overshoots that leave the sectors benefiting from a soon-to-end trend extremely overvalued relative to its neglected, disfavored brethren. For example, in the early 1980s, energy, gold, and bonds were priced as if the 1970s inflation trend and double-digit interest rates would last indefinitely. Instead, the next two decades of disinflation reversed the trends in all three asset class values, making energy and gold underperform, while bonds and other beneficiaries of nominal interest-rate declines outperformed.
