Issue 7 – The New Regime Is Fiscal-Monetary Cooperation: Commanding Heights

A Snapshot of the Market for the Week Ended February 19, 2021:

The stock market experienced moments of temporary anxiety. Yet, it was generally indifferent to good news around Covid-19, excellent earnings reports and a likely infusion of more fiscal relief. The S&P 500 fell 28 points, or 0.7%, to end at 3907. The selling pressure was evident in growth stocks as these are in general more sensitive to rising interest rates, which reduce the value of future cash flows. There are concerns among traders that a large and rapid spike in yields north of 2.00% for ten-year Treasury could turn into an inflection point. However, value stocks tend to perform best when the economic outlook brightens, and inflation expectation rises. The ten-year Treasury yield jumped 20bps from a week ago to 1.34% and 43bps since the end of 2020. The yield curve is much steeper than it was a few weeks ago indicating a fast economic recovery is underway and Tip rates are much more negative than they were, expressing higher prices are forthcoming.


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By Hubert Marleau

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By Hubert Marleau

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