Is High inflation On The Way? | LPL Daily Market Update

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Tuesday, March 30, 2021

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Let’s Talk About Inflation

LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder examine inflation concerns and explain why they think any increases in inflation will most likely be fleeting in the latest Market Signals podcast.

Daily Insights

U.S. stocks opened little changed as Treasury yields resume their rise.

  • Valuation concerns push the Nasdaq Composite 100 lower as the 10-year Treasury reaches 1.76%.
  • European markets are modestly higher in midday trading with Germany outperforming.
  • Asian stocks were mostly higher overnight with Korea outperforming as the region shrugs off liquidations held by Archegos Capital.

Inflation is coming

Fixed income markets are pricing in elevated levels of inflation.

  • According to certain market-based inflation metrics, markets are expecting sustained inflation rates not seen since the late 2000s.
  • The five-year market-implied inflation rate is now pricing in inflation rates to average approximately 2.6% per year over the next five years, amongst the highest inflation expectations since the Great Recession in 2008-09.
  • The market has predicted high inflation rates before—most notably in 2011 and 2013—and been wrong.
  • Structural factors such as globalization and technology, to name a few, have kept inflation rates well contained historically and remain in place.
  • For more on our view on what the fixed income markets are telling us about inflation, see today’s LPL Research blog, available at 12pm ET.

LPL Financial closed on Friday, April 2, 2021

LPL Financial will be closed along with the stock market for the observation of Good Friday. The bond market will be open a half day. There will be no Morning Call, Daily Market Update or blog post.

  Technical update

  • The Nasdaq led major benchmarks lower Monday, falling 0.6% though energy and financials were the worst performers on a sector level.
  • Utilities and consumers staples were the top performers to begin week, and are the two best performing sectors so far this month despite the S&P 500 Index gaining more than 4% through Monday’s close.
  • Defensive outperformance can be an indication of a flight to safety under the surface that bears watching.

Are We on the Brink of an Inflation Crisis?

LPL Research explains why any upticks in inflation will ultimately prove transitory. Learn more in this week’s Weekly Market Commentary.

 

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