Investors will zero in on the Federal Reserve’s monetary policy meeting next week that the “Goldilocks” market environment that has helped lift stocks and boosted bond sales is being tested by inflation.
Stocks have risen steadily in recent weeks and now stand on fresh records, raising a rally to 13% in the S&P 500 (.SPX) this year and 90% from the bottom in March 2020. U.S. government bonds also rallied after their first-quarter sell-off, the 10-year Treasury yield, which has been in price contrast, recently stood at 1.46%, about 30 basis points from its first-quarter high.
Some of these gains are predicted by the Fed’s assurances that rising inflation will not last long enough for the expected end-to-end in easy-economy policy. The Fed is growing less confident in these estimates that the signals could unstable stocks, which have benefited from quantitative easing and hit bonds, as the value of long-term debt is declining as prices rise.
Investors are “going to look for signs that inflation will be more stable,” said Michael Aaron, chief investment strategist at State Street Global Advisors.