Eq: Large Cap

(New York)

Junk bonds have been riding the rally like many other financial sectors…see the full story on our partner Magnifi’s site

(New York)

On the surface, the last few weeks could not have gone better. Vaccinations are up, inflation worries are down, economic indicators are surging, and earnings are great. This has led to a nice relief rally after a rough later winter/early spring. However, the reality is that the summer may again be a tough time for markets. The reason why—a lot of good news is fully priced in, but bad news no longer is. Think about it: if an incredible piece of news came out today, do you think the market would react as strongly as if a very bad piece of news came out? Your gut is probably telling you the latter would have a much stronger response.

FINSUM: We have to agree that the market has gotten a lot of relief from recent news. But really, it would only take one really bad inflation report to send volatility spiking.

(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.

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