The Flawed Inflation Narrative; And “V“ vs. “U“

  • Date: 17-Jan-2021
  • Source: Forbes
  • Sector:Economy
  • Country:Middle East
  • Who else needs to know?

The Flawed Inflation Narrative; And “V“ vs. “U“

Hands Holding Financial Section Of Newspaper, Following Treasury Yield Curve. (Photo by Education ... [+] Images/Universal Images Group via Getty Images)



Universal Images Group via Getty Images

The equity markets finally took a breather last week (ended January 15th), with the S&P 500 falling a mere 1.5%; that's down from its record high a week earlier. Perhaps the really poor economic data played a role, but then again, equity markets like such poor data because it means more stimulus (Biden's $1.9 trillion plan), and markets know that much of the stimulus always finds its way into the financial system. Nevertheless, for the economy, if the December and January data continue, we could very easily have a negative GDP quarter.

The 10-Year Treasury Note reached as high as 1.15% on January 11th, 12th and 14th. It was 0.93% on January 4th, so quite the up-move. It closed the week down 6 basis points from that 1.15% peak at just under 1.09%. While nuts and bolts economics indicates that deflation is still an issue going forward, inflation fears appear to be the driving force in this recent up move, with such fears ignited by the recent price spikes in commodities.