BOSTON, March 23 — Treasury yields marched higher yesterday, bringing US stocks with them, as investors digested the increased likelihood of swift interest rate hikes following hawkish comments from the US Federal Reserve.
Fed Chair Jerome Powell said on Monday the central bank could move “more aggressively” to raise rates to fight inflation, possibly hiking by more than 25 basis points at one or more meetings this year. “The degree of difficulty for Jerome Powell’s Fed to stick a soft landing for the economy is about the same as Captain Sullenberger’s heroic emergency landing on the Hudson River,” said Aaron Clark, a portfolio manager at GW&K Investment Management in Boston, referring to the 2009 landing of a US Airways plane after its engines failed.
“We saw the sharp rise in yields yesterday and we see that continuing today on the long end, so that’s likely to put pressure on equities...it will be hard for equities to have a positive performance.” “We believe investors should add risk in areas that overshot on the downside such as innovation, tech, biotech, EM/China, and small caps. These segments are pricing in a severe global recession, which will not materialize, in our view.”