Inflation data points to the economy running hot whereas bond yields signal slower growth ahead. We weigh up the various forces at work.
With many investors “at the beach” or at least in their backyards, all may appear quiet. But looking at events from Washington to Beijing, that’s hardly the case.
Inflation prints suggest a “hot economy”, but bond markets signal slow growth ahead. Consumer sentiment data in August was surprisingly low. And two major infrastructure bills, one to literally “build bridges” and another to substantially reshape social and environmental policies passed major hurdles. And the news on COVID caseloads is troubling, especially for the unvaccinated. So, should markets expect growth through COVID and higher taxes? Or will inflation cause the Fed to tighten more quickly and curtail the delayed “post-COVID” recovery that’s yet to fully appear?