Stock futures are edging up as March kicks off, while some Asian shares soared on a big rebound in China factory activity data.
Of course, there’s the risk that strong China growth could keep global inflation pressures higher, forcing U.S. and Europe long-term bond yields to rise even more . That leaves equities “caught between responding positive to growth or negatively to inflation and potentially higher interest rates,” say analysts at Saxo Bank.
The shift was caused by post-COVID stimulus inflation spikes that forced Fed rate hikes, which in turn “triggered the biggest bond market selloff ever and repriced U.S. growth stocks, whose valuations depend on low discount rates,” they say. In the short term, they expect higher stock-bond correlations will stick around, as they tend to be autocorrelated — last month’s correlation tends to predict the next months, etc., which has been the case since 2002, as their chart shows:So what’s it all mean? During periods of higher stock-bond correlations, bonds are less likely to offset equity falls and long-duration bonds get less attractive, they say.
The buzz Lowe’s LOW shares are down as earnings beat, but DIY-retailer’s outlook is gloomy. Dollar Tree DLTR , Kohls KSS , Abercrombie ANF and Wendy’s WEN will also report. Tesla’s TSLA long-awaited investor day has arrived. CEO Elon Musk promised to unveil a “path to a fully sustainable energy future for Earth.” Meanwhile, service at Musk’s Twitter was spotty in the early hours.
How is Berlin's joker team germane to the positive correlation between stocks and interest rates?
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