Will the passage of the latest Covid aid bill signal a transition point in the markets?
With nearly 3 million Americans getting vaccinated daily and with spring right around the corner, the base case is for continued reopenings and working our way to life getting back to normal. Therefore, it should not surprise us if this latest covid aid bill is the last one.
If so, then we are reaching a transition point in the economy and the market, that means an economy that will be less driven by stimulus and more truly economically driven, with spending coming from wages and not stimulus. As the economy starts to stand on its own two feet we need to see if it lives up to the hype that has propelled stocks to record highs.
For the week ahead, we do get some data releases on prices and inflation. With all the talk about interest rates and how high they can go, we need to see how the market reacts to any inflation data. Not only should we be watching the 10-year Treasury yield but also what it does to inflation expectations for the future.
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