The relationships between stocks, interest rates, inflation, Bitcoin, and volatility have been on full display this month, making this last week of the month extremely interesting.
Let’s pick up where we left off last week with interest rates and inflation because they’ll likely get a fair number of headlines. As the 10-year Treasury makes a run towards one-point-four percent expect to hear more dialogue about how high rates can go before becoming a problem for stocks. For inflation, given the hot numbers we saw in the producer price index and the import/export price index, it’s no surprise that interest rates have picked up. The question concerning inflation is whether this is transitory or the beginning of a new environment. This may be one of the reasons why the VIX slowly crept up last week as investors might start to worry that inflation could force the Federal Reserve to act before they truly want to. Is this reflation trade the reason Bitcoin crossed over a trillion-dollar market value last week? What about gold? Gold is getting no love this year even with the inflation headlines.
For the week ahead, how do stocks close out the month? Can they move higher despite the interest rates and inflation headlines? Does large value continue to outperform large growth? The relationships between asset classes and styles have made this such an interesting month and we’ll continue to discuss it all right here.
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