Lower for longer in the face of strong markets

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AMP Capital expert
Posts: 34
Registered: ‎10-03-2016

Lower for longer in the face of strong markets

[ Edited ]

Have we reached an inflection point?

 

The move higher in equities since the US election, amid hopes of fiscal policy tailwinds, including infrastructure spending, reductions in corporates taxes....has also occurred with a move higher in bond yields.  

 

Bond yields have moved higher, particularly at longer maturities.  Now this is going to be a bit technical, but the move in yields is due to a range of factors - both a move higher in future inflation expectations (signalling the market is expecting stronger growth putting pressure on prices), and a move higher in real yields which could be interpreted as a signal that the market is willing to believe potential growth could be turning higher.

 

Very interesting indeed, we could be at an inflection point, where things begin to look a lot better.  Of course, time will tell, but at this stage, keep an eye out for a jump in M&A activity.  This would be an important signal that boardrooms are becoming more positive about the future!

 

As always, any questions, please reach out!  Good luck!

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