NEW YORK, June 11 — Blistering inflation is threatening to re-ignite twin declines in US stocks and bonds, leaving investors with few places to hide from a Federal Reserve that appears locked in to its most aggressive policy tightening in decades.
Stocks and bonds have fallen in lockstep for most of the year as tighter Fed policy lifted yields and dried up risk appetite, pummeling investors who had counted on a mix of the two assets to buffer declines in their portfolios. “We therefore suspect that more pain is yet in store for US asset markets, with Treasury yields rising further and the stock market remaining under pressure.”
“You have a very difficult picture for financial markets for the next several months,” he said. “Investors to accept that the consensus view was wrong and inflation is still a problem.” Orlando sees fears of stagflation — a period of slowing growth and high inflation — as the market driver.