Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

NASDAQ Hits New Record As Markets Say Inflation Is Dead

By XM Group (Trading Point )Market OverviewJun 18, 2021 05:22AM ET
www.investing.com/analysis/nasdaq-hits-new-record-as-markets-say-inflation-is-dead-200586894
NASDAQ Hits New Record As Markets Say Inflation Is Dead
By XM Group (Trading Point )   |  Jun 18, 2021 05:22AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
· Tech stocks power higher as markets bet Fed will tame inflation
· Dollar keeps rampaging, gold heads for massive weekly losses
· Pound struggles after soft data, quadruple witching coming up


Inflation-linked trades fall apart


Bets for raging inflation in the coming years are being unwound at a stunning pace, sparking all sorts of havoc in the markets. It all comes back to the Fed, which signaled that the days of infinite liquidity are drawing to an end and that it will keep inflation under control by raising rates at a faster clip.

As such, the inflation trades that blossomed earlier this year are now falling apart, as long-dated inflation expectations and Treasury yields decline in tandem. The bond market is essentially pricing out inflation risk and that's spilling over into everything else.

Commodity prices from lumber to gold have taken an absolute beating, the dollar keeps powering higher, and stocks with high growth prospects are back in fashion as the 30-year Treasury yield tanks.

Lower long-dated yields are a blessing for tech and growth stocks because the excessive valuations on many of these names make more sense the lower yields fall. In contrast, value and traditional stocks are more sensitive to short-dated yields, which have risen lately. Hence why the Nasdaq hit a new record high yesterday, whereas the Dow Jones struggled.

'King dollar' returns?


Over in the FX theatre, demand for the dollar has been relentless. The sharp rebound likely reflects a short squeeze as many players bail out of their bearish positions. It might also encompass a shift in expectations around the reserve currency in a world where the Fed takes a step back but other central banks keep hammering away.

The yen is the only major currency that managed to stand its ground against the almighty dollar lately. It turns out the unwinding of the inflation trade and the ensuing decline in long-yields has been beneficial for the yen, which lives solely off interest rate differentials.

That said, this doesn't seem like a real turnaround for dollar/yen. The Bank of Japan extended its pandemic-relief program earlier today and with the economy still trapped in deflation, it will be years behind the Fed in normalizing monetary policy – if it ever does.

Sterling under fire, gold licks wounds

Meanwhile, the British pound is on the retreat today following some disappointing data. Retail sales fell unexpectedly in May, sparking some concerns about fading reopening momentum. Of course, this drop comes after a breathtaking surge back in April, so it won't be concerning for the Bank of England, which meets next week.

In the commodity spectrum, gold is attempting a minor recovery on Friday but is still on track to close the week some 4.5% lower. Bullion has been one of the biggest casualties of the Fed's hawkish turn, as the withdrawal of endless liquidity coupled with falling inflation expectations and a stronger dollar is a devastating cocktail.

Admittedly, the collapse was too violent and looked overstretched, so a rebound here makes sense. Still, the longer-term trajectory seems negative. The positive catalysts that brought gold to the dance are simply fading, from cheap money to inflation fears to a struggling dollar.

As for today, the calendar is empty but that doesn't mean markets will be calm, as it's quadruple witching day. This is when options and futures on stocks and indices expire, which can spark decent moves without any real news.

NASDAQ Hits New Record As Markets Say Inflation Is Dead
 

Related Articles

NASDAQ Hits New Record As Markets Say Inflation Is Dead

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email