Higher economic growth and inflation in the coming months is likely to support stocks overall because Americans will increase spending on goods and services when pandemic restrictions ease, said Fahad Kamal, chief investment officer at Kleinwort Hambros.
“For most investors, looking across the asset landscape, there still remains no alternative to equities,” Mr. Kamal said. “Hiring is happening and normality is returning, and all of that is really positive for cyclicality.” In bond markets, the yield on the 10-year U.S. Treasury note ticked up to 1.494%, from 1.449% Friday, reversing an earlier decline. Bond yields rise as prices fall. The 10-year yield had dropped for five consecutive weeks, its longest stretch of losses since August 2019.
“It is completely linked to the decline in inflation expectations,” Candriam’s Ms. Dufossé said. “The market is not pricing overheating anymore in the U.S. economy. Investors think the Fed will be able to contain any overheating in inflation.” The so-called yield curve flattened, with shorter-dated yields rising to reflect higher rate expectations, while longer-dated yields fell because higher interest rates in the near term would likely mean slower growth and lower interest rates further into the future.Federal Reserve Chairman Jerome Powell described the outlook for inflation in the U.S. economy and said there are signs that prices that have moved up quickly should cease rising and retreat.
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