The author states stagflation is here and the "next leg down" is coming, linked to the April Fed meeting. Stagflation (high inflation + weak jobs) and subsequent aggressive Fed rate hikes are historically negative for broad equity markets. The author's macro view implies a declining stock market. The economy could prove more resilient, corporate earnings could stay strong, or the market could look through near-term rate hikes.
The author states stagflation is here and the "next leg down" is coming, linked to the April Fed meeting. Stagflation (high inflation + weak jobs) and subsequent aggressive Fed rate hikes are historically negative for broad equity markets. The author's macro view implies a declining stock market. The economy could prove more resilient, corporate earnings could stay strong, or the market could look through near-term rate hikes.
OECD projects 4.2% inflation, and the author argues the Fed will be forced to "jack up rates" to combat it. Higher interest rates are negative for long-duration bonds, causing their prices to fall. A stagflationary environment with anticipated Fed tightening is a clear bear case for long-term Treasury bonds. The Fed could signal a more dovish path, inflation could decelerate faster than projected, or a flight to safety could boost bond prices.
OECD projects 4.2% inflation, and the author argues the Fed will be forced to "jack up rates" to combat it. Higher interest rates are negative for long-duration bonds, causing their prices to fall. A stagflationary environment with anticipated Fed tightening is a clear bear case for long-term Treasury bonds. The Fed could signal a more dovish path, inflation could decelerate faster than projected, or a flight to safety could boost bond prices.