Looking Back to Look Forward

One of the most famous and impactful quotes on the importance of understanding history comes from Winston Churchill: “The farther backward you can look, the farther forward you are likely to see.” It beautifully captures the idea that understanding our history is the best tool we have to navigate and anticipate the future.

While today’s higher inflationary environment has consumers concerned, it also poses real opportunities for investors ready to put capital to work as yields rise. Looking back at some eye-opening historical ranges helps put our current environment into perspective.

In my own bond trading career, I’ve seen 30-year municipal bonds issued with coupons as high as 15.875% in 1981 — and as low as 1.65% in 2020. That’s the range we’re working with.

Since the Treasury bond market is the primary gauge for tracking rate changes day to day, it’s worth looking at where we stand today relative to that history, as well as where we’ve moved year-to-date.

With that range in mind — from double-digit coupons to near-zero yields — the natural next question is where the Federal Reserve’s benchmark rate fits into that same story, and what past cycles can tell us about where we might be headed.

Where we are now: Fed funds target is 3.5%-3.75%, effective rate ~3.63%, after three cuts in late 2025 brought rates to their lowest since early 2022. The Fed held steady in January 2026, calling the economy “on firm footing.”

Historical parallels: ⁽²⁾

• 1980s Volcker era: Rates peaked at 20% in 1980 to crush inflation — shows today’s level isn’t historically restrictive.
• 1994–95: Fed hiked hard, then paused/cut — soft landing achieved. The hopeful comparison.
• 2008–2015: Rates bottomed at 0.25% for years — the “cheap money” era that makes today’s rates feel high by comparison, even though they aren’t by long-run standards.
• 2018–19: Hiked, then cut three times as “insurance” — no immediate recession. Structurally similar to the recent 2025 cuts.

The long-run average fed funds rate since 1971 is 5.4%, so today’s 3.5-3.75% is actually below normal historically — it just feels high next to the unusually cheap 2010s. The closest playbook match is 2019: a few precautionary cuts, then a pause to watch the data, which is exactly where the Fed sits now.

While history can’t give us an absolute roadmap for the future, it can give us a fuller understanding — one that helps us make more informed decisions going forward. With that in mind, investing in this environment calls for caution, but it remains very investable.