2023-07-14 Markets
The last three weeks have continued to be friendly to equities and somewhat hostile to bonds. This despite an increasing number of articles and expert opinions touting the attractiveness of nominal bonds and the yield they offer, as if there was something special about the levels reached.
A good deal of this optimism is related to the general hunger for a return to normality and the ability to obtain income without being forced to take the risk of equities. But investors seem also very keen to extrapolate the increasingly good inflation picture into the near future. In this context, it’s worth recalling that inflation year-over-year is a simple calculation that compares this year’s price – or index – level with last year’s. The picture below makes it clear that additional improvements in US inflation may not be as easy to obtain over the next six months, unless we see a decline in prices to December.
A good deal of this optimism is related to the general hunger for a return to normality and the ability to obtain income without being forced to take the risk of equities. But investors seem also very keen to extrapolate the increasingly good inflation picture into the near future. In this context, it’s worth recalling that inflation year-over-year is a simple calculation that compares this year’s price – or index – level with last year’s. The picture below makes it clear that additional improvements in US inflation may not be as easy to obtain over the next six months, unless we see a decline in prices to December.
