Overall, the backdrop of improving earnings, 6.5% GDP growth, and the continually reopening U.S. This sets up a scenario where money still has to chase returns in a low-yield environment.
The Fed has also continued to voice its commitment to ultra-low rates and its new “average inflation targeting,” meaning it will allow inflation to run above its 2% target for some extended period.Īmid the fears of inflation and a possible end to the easy-money policy, it’s worth reminding investors that if rates do climb, they will likely remain historically low. But the central bank continues to say inflation will be “transitory” and stresses that prices are compared against the early shock of the coronavirus. The logic follows that higher prices will force the Fed to raise rates. economic resurgence, driven by the vaccine, pent-up demand, easy money policies, and government checks. The jump in consumer prices came amid the U.S. There was no clear catalyst aside from profit-taking after stocks surged to end last week following a wave of inflation-based selling that saw the Dow and the S&P 500 suffer their toughest three-day stretch since October.ĭespite the pullback, the benchmark index remains above its 50-day moving average after buyers stepped in last Thursday once enough Wall Street decided the inflation pullback had been overdone.Īpril’s CPI jumped 4.2% from a year earlier, for its largest 12-month jump since the summer of 2008 and came above expectations. The market dipped to start the week, with stocks down again Tuesday.