NEW YORK, Aug 5 — A highly awaited inflation report and elevated bond yields offer the latest test to a US stock rally that has delivered hefty gains this year.
“After a massive run-up in equities ... any sort of blip in terms of any of the macro data probably going to be a reason for people to take profits,” said Jack Janasiewicz, lead portfolio strategist and portfolio manager at Natixis Investment Managers. Janasiewicz of Natixis said a stronger-than-expected consumer price reading next week could spark a decline of up to 5 per cent in the S&P 500. He said such a drop would be “healthy” given the index’s big runup this year.
Rising global prices for oil and food, which the Fed’s rate increases do little to control, may have more sway on inflation in coming months, said Tim Murray, a capital markets strategist at T. Rowe Price. Miletti is growing more bullish on corners of the market that have underperformed, including small cap stocks.
“The move in the 10-year US Treasury yield above the 4 per cent level will likely act as a headwind to further expansion in already lofty equity valuations,” Keith Lerner, co-chief investment officer at Truist Advisory Services, wrote this week.