DOW, S&P 500, and NASDAQ Rise, Will Rising Yield Impact Economic Recovery?
Leading indices in the United States rose, shaking off losses of Feb 24, led by a recovery of tech stocks. In the last few weeks, the exit from high-performance tech and rotation into value stocks has picked up steam. Notably, stocks decimated due to coronavirus are now attracting capital from value investors. They anticipate a more substantial recovery in 2021. Because of this, the retracement of consumer-facing and I.T. sector stocks are fueling the growth of energy, industrial, manufacturing, and financial stocks.
The stock market will most likely edge higher, defying overvaluation concerns of analysts. These analysts also maintain that the economy is overheating. As such, the FED will eventually intervene by increasing rates in the coming months. Before then, it is clear that February has been a special month for value stocks outperforming high growth stocks for the first time in 20 years. Analysts point out sweet spots for scooping potent stocks as monetary policy continues being accommodative, making it harder for funds to squeeze out decent yields.
Impact on Indices:
Neutral. Jerome Powell attempts to assuage the market that rising yields demonstrate the confidence investors have in economic recovery is still not convincing. Inflation concerns and rising treasury yields weigh negatively on the stock market. If the rally continues, it may impair recovery, which causes more problems in equities.
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