It appears US stocks can’t stop and won’t stop. In what seems like the simplest argument to buy stocks, a sooner return to post-COVID world, the reflation trade has been running wild. The best streak of gains in 17 years suggests the relentless stock market rally is overlooking worrisome virus mutations and taking the Fed’s promise that they are not even thinking about tapping the stimulus breaks.
After making fresh record highs, the S&P 500 index pared gains but have stabilized after Fed’s Esther George noted the rise in yields is not concerning but that they will keep watching. Wall Street shrugged off a better-than-expected Empire Manufacturing Survey. The NY survey showed prices paid climbed to the highest level since 2011 and six-month general business conditions improved sharply.
I can’t imagine the Fed will stay quiet if the 10-year Treasury yield passes 1.30% relatively easily this week.
It looks the world is going through a dramatic shift to include a quicker return to normal as COVID cases improve. COVID cases continue to decline and vaccine optimism just continues to grow. The Biden administration is vaccinating 1.6 million Americans per day, well ahead of their initial targets. Virus mutations have not derailed any optimism for the US and if that continues, reopening of the economy will continue. Supply chains will have to deal with disruptions, whether its microchip shortages or rare earth metals.
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