For much of the 2010s, investors stuck loyally to TINA.  The mantra was that in an era of rock-bottom interest rates, There Is No Alternative to investing in equities.

But with central bank interest rate hikes over the last three years, investment wags pointed out that TARA had arrived on the scene: There Are Reasonable Alternatives.

In a world where you can finally gain a return on cash and bonds, with equities selling off, TINA’s attractions seemed less compelling.

Now interest rates will soon fall again.  So is it time to leave TARA for TINA?

Interest rate cuts are a welcome sign

Last week, the US Federal Reserve indicated it was on track to cut interest rates three times in 2024.

Many analysts think the first rate cut will come in June.

It’s a positive sign that the worst of the inflation seen over the last few years is behind us.  And with the Eurozone and the UK seeing similar reductions in inflation, it’s likely they will follow in the second half of the year.

What’s more, inflation appears to have been tamed in the western world without causing a recession – contrary to what many commentators expected when the interest rate rising cycle began.

We’re unlikely to see zero rates again anytime soon

One consequence of the relative resilience of western economies is that interest rates are unlikely to return to the super-low levels we experienced for nearly a decade in the wake of the global financial crisis.

Instead, the coming years look like a more normal environment, where debt has a cost – but one which is bearable in the context of positive economic growth and rising asset prices.

TARA is sticking around

A more normal interest rate environment is a sign of economies no longer needing the life-support of free money in order to grow.

It also has consequences for the pricing of assets. Loss-making tech companies which benefited from an ultra-low cost of capital may find it harder to fund themselves. More mature businesses producing solid cashflows will seem more attractive. Bonds and infrastructure prices will normalise, playing their role as a provider of returns which are less correlated to the stock markets.

As interest rates stabilise, it seems the argument that There Are Reasonable Alternatives can be justified for some time to come.