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  • Scott Poore, AIF, AWMA, APMA

Markets Forgot That Rates & Inflation Can Rise Together

Equity markets were spooked by Inflation fears and the rise in the 10-year Treasury yield. The Interest Rate on the 10-year has increased more than 100 points since the low last August. At the same time, Inflation has risen 1.9%. The last time Interest Rates and Inflation increased significantly was 2003-2006. During that period, Inflation increased 10.9% and Interest Rates increased more than 200 basis points. What is forgotten is that the S&P 500 Index also increased more than 33% during the same time period. Equities, lest we forget, are one of the better hedges against inflation. Markets have forgotten this and reacted negatively last week.


Meanwhile the economic picture continues to improve. The National Financial Conditions Index improved last week. The economic releases last week were overwhelmingly positive last week. Most important, Weekly Jobless Claims surprised to the downside with 100,000 fewer claims than expected and the largest decrease in claims since August of 2020.


A significant development over the weekend in the fight against COVID came in the FDA's approval of Johnson & Johnson's vaccine. This will speed up an already improving immunity picture. Based on the CDCs latest estimates, which seems to be disconnected from what is broadcast by the media, those who have been vaccinated or have been infected by COVID equal nearly 50% of the population with antibodies. The number of positive cases continues to decline, standing at 4.8% positivity rate, which has not been seen since October of last year.


Click below to access our Weekly Market Recap.


Market Recap_online 03_01_21
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