Inflation compensation and the outlook for Treasuries

Although Treasury inflation compensation – i.e. gaps between the nominal yields of conventional Treasuries and the real yields of TIPS with comparable maturities – has risen sharply since the spring, we don’t think this will prompt less accommodative monetary policy from the Fed any time soon.
John Higgins Chief Markets Economist
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Global Markets Update

Assessing the market reaction to Omicron so far

This Update takes stock of the moves in developed market (DM) asset markets in response to the “Omicron” variant, and provides initial thoughts on how we think things might progress if some of the fears about it are realised.

3 December 2021

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Is inflation about to spell trouble for the stock market?

US inflation hit its highest level since the 1990s in October and has now reached a rate that, historically, has coincided with very poor stock market returns. Notwithstanding the uncertainty around the impact of the “Omicron” variant of the coronavirus, we don’t expect inflation to stay at quite such high levels, so we aren’t among those calling for a stock market crash driven by high inflation, or a decade of negative real returns like we saw in the 1970s. But we do think investors are underestimating the chance that inflation remains high enough to put the brakes on the stock market’s gains, which we think will be underwhelming over the next few years.

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Contagion from Turkey’s crisis likely to remain limited

Spillovers to other emerging markets from Turkey’s ongoing currency crisis have been limited so far and we think this will remain the case even if Turkey’s financial markets remain under pressure.

24 November 2021

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Asset Allocation Update

What’s behind renewed US equity outperformance?

It has become harder to make the case that the stock market in the US will fare worse than those in the rest of the developed world, now that the “rotation” trade has fizzled out. Nonetheless, we still think there are other reasons to expect the relentless outperformance of US equities to end.

7 July 2021

Asset Allocation Update

Would US equities beat Treasuries if inflation surged?

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1 July 2021

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We do not think that the surge in the Conference Board’s index of consumer confidence in June is a reason to be positive about the outlook for the US stock market.

30 June 2021
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