Bonds Rise As Concerns For Inflation Fleet

(FiveNation.com)- Investors are apparently not concerned about a potential rise in inflation, as they’ve pushed stock markets to record highs in recent days.

On Tuesday, the S&P 500 index closed at what is a new record high, even as the U.S. government issued a recommendation to pause the use of the COVID-19 vaccine produced by Johnson & Johnson.

Meanwhile, the Nasdaq 100, which is heavy with tech companies, also set a new record. The Dow Jones Industrial Average, though, finished the day in the red.

Last month, consumer prices increased greater than most financial pundits expected. Still, investors analyzed that the increase wasn’t fast enough to warrant a policy change from the Federal Reserve.

At the same time, the drop in bond yields that are happening now did weigh down shares of banking companies and other financial institutions.

Mike Loewengart, who serves as the managing director of investment strategy at E*Trade Financial, said:

“The market has been skittish about rates for some time. While this may cause some short-term volatility, investors have been pretty steadfast in their faith in a full economic recovery.”

Earlier this week, officials at Johnson & Johnson agreed that they would pause their vaccine distribution efforts and also investigate any links from its coronavirus vaccine and severe blood clots, which have proven to be very rare. J&J officials said they’d pause quickly as they updated their guidance for medical professionals who distribute the vaccine.

This news caused J&J shares to dip. At the same time, the stock prices for the other two companies with COVID-19 vaccines in circulation — Pfizer Inc. and Moderna Inc. — rose.

The United States said it anticipates it can still meet demand for the vaccines, even with the J&J vaccine paused for now.

A recent survey by Bank of America found that fund managers are more worried about a taper tantrum and inflation than they are the economic risks of the COVID-19 pandemic.

As John Hancock Investment Management’s co-chief investment strategist, Emily Roland, said:

“A lot of growth and inflation have already been priced into the market. It’s almost as if you need to exceed those expectations in order to see a more pronounced reaction from markets.”

Consumer prices have definitely risen recently, but that doesn’t seem to worry the Federal Reserve’s policymakers. They have said they expect this increase in the CPI to be relatively short-lived.

Traders, on the other hand, don’t necessarily agree. They have some fears that CPI could have an effect on tech stocks and bonds, for example.

Other stocks seeing a boost recently were Bitcoin, which reached an all-time high for the company. Investors are bullish on cryptocurrencies as Coinbase Global Inc. is about to go public.

Oil, meanwhile, was trading around $60 per barrel.

This week, some big financial firms and banks are set to report their earnings from the first quarter, which could affect the markets even more.

In addition, data from retail sales and industrial production in the U.S. is set to be released on Thursday of this week.