Displaying items by tag: fed

(New York)

Yields did something very alarming today: they shot up to their highest level in two weeks as a kick-off to summer trading. Yield rises were the epicenter of all the volatility a couple of months ago, and have been the key driver of stock returns as they are the primary asset for pricing inflation risk. So the big question is where will they go from here?

FINSUM: Inflation fears have calmed, but commodities prices are still keeping those worries alive. The Fed seems to hold the key to the whole issue. As long as it walks the line that inflation is transitory, and data at least marginally backs that up, the market will be fine. But if we get a couple suspect reports, and a bad headline or two, all exacerbated by an off-the-cuff Fed remark, we could easily stumble into a correction.

(New York)

May 12th was one of the key market moments of 2021. All eyes were on new inflation data that would make or break the market. The result was a definitive “break”. Inflation came in hot, with the reading measuring 4.2%, well over already high expectations of 3.6%. Markets took a pounding, with the Nasdaq leading the day’s losses in a 2.7% fall. The Dow and the S&P 500 also fell sharply.

FINSUM: We are now in the middle of another market tantrum. It is critical to ask oneself why inflation is so troubling. The reason the market is losing is because of higher rates’ effect on tech stock valuations, but even more importantly, the timeline for the Fed’s taper. But if you can put that aside, what is actually happening is that economy is doing well, and earnings look likely to be great. We think investors should just ride out the storm.

(San Francisco)

The Fed has continued to reiterate low rate accommodations…see the full story on our partner Magnifi’s site

(New York)

Q1 ended about as poorly as possible for the treasury market as losses according to ICE indices hit…see the full story on our partner Magnifi’s site

(New York)

The bond market is a powder keg that may have only started to explode, says ING. “The bond market has been sitting on a powder keg since last week. Attitude towards duration among fixed income investors has grown cautious, to put it mildly”, says Padhraic Garvey, regional head of research for the Americas at ING. “In this context, we do not blame investors for exiting at the first sign of a sell-off”, he continued.

FINSUM: Investors are currently terrified about inflation and it is hitting Treasury yields and tech stocks squarely on the chin. Our opinion is these fears are overblown and this is a market overreaction, especially as it regards tech stocks. These stocks are losing despite the fact that underlying fundamentals strongly favor the growth of tech earnings.