The bull-run in global stocks fuelled by cheap cash and reflation hopes will continue for at least another six months but a rise in bond yields as inflation expectations grow could throw a spanner in the works, Reuters polls found.
But even as a gauge of equities slipped this week on hints of rising inflation led by higher oil prices and the strongest copper price in nearly a decade, the Feb. 12-24 polls of nearly 300 equity strategists found the trend of stock market gains was set to continue this year. "It's the health-crisis nature of this recession that has led to the greatest monetary and fiscal policy response in history. It's not that people are so bullish about the future but rather they are flush with cash and the excitement of making money," said Michael Wilson, chief U.S. equity strategist at Morgan Stanley.
"That is why we think the next leg-up in equity markets will coincide with a rotation towards coronavirus-vulnerable sectors." That was also reflected in a market gauge of inflation expectations, the Treasury Inflation Protected Securities' break-even rate, which has risen this month, with the yield on 30-year U.S. TIPS rising above zero for the first time since June.