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How big a threat is inflation to US equities?

Today’s slump in S&P 500, following the release of a hotter-than-expected US CPI report for March, underscores the US stock market’s vulnerability to disappointing news on inflation. (See Chart 1.) Nonetheless, even though the pull-back was accompanied by a surge in short-dated Treasury yields as investors continued to pare back their expectations for monetary easing, we doubt it marks the beginning of a new trend in equity prices.  

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