Hong Kong: As the roller coaster of the global market continues, Asian investors have retreated. The market’s concerns about inflation have made people’s optimism about vaccines the first place among Thursday’s optimism.
After a year-long rally and ignited at the end of the pandemic tunnel, the focus now is on the expected surge in activity as the confinement measures have been eased and life has returned to a certain normal state.
More and more people believe that the huge lingering expenditures of repressed consumers and the upcoming stimulus package will ignite the rocket of falling prices and force central banks to withdraw ultra-loose monetary policies-including record lows. Interest rates-this is the main driver of the inventory surge.
In recent weeks, the rise in U.S. Treasury yields (which is a key indicator of future interest rate expectations) has risen to a one-year high, making the stock market turbulent, and Wednesday’s rebound triggered another plunge on Wall Street.
Although the Fed has repeatedly pledged that it will not adopt tightening policies until inflation continues to rise and employment resumes, people still feel panic.
The fear of higher borrowing costs has combined with a feeling that valuations may have run ahead of themselves and were due a pullback on profit-taking.
“Inflation is a concern; there is a lot of money sloshing around the system and it makes sense to have some sort of a correction right now,” Shana Sissel, at Spotlight Asset Group, said.
“And bond yields going up is the market’s implicit way of tightening since the Fed has made it clear they don’t have the intention of doing so.”
And Axi’s Stephen Innes added that the US central bank “will need to fabricate a more convincing scenario to keep rate hike fever in check and avoid a colossal meltdown”.
“Since March 2020, the free-and-easy-money principle has bankrolled speculators, and that liquidity-supported house of cards could easily topple at the first sign of a Fed blink.”