- Tech stocks lead US markets to new high
- Eyes turn to Federal Reserve meeting later this week
- With inflation deemed transitory, tapering is still some months away
Cooler rates and broadly positive risk sentiment helped send the Nasdaq composite to a record high on Monday, whilst the tech sector lifted the broader market as the S&P 500 also notched a fresh all-time closing high. Mega tech names led the gains for the index, whilst financials were the biggest drag. European stock markets are broadly higher in early trade. Growth/tech have come back, whilst the reopening/reflation trade has cooled somewhat.
Ahead of the Federal Reserve meeting this week there is no sign of a tantrum. Stocks are happy to catch the tailwinds higher despite being caught between a super-hot inflation reading last week and the Fed’s policy meeting. Rates have been steady coming into the meeting with the benchmark 10yr yield hovering a little below 1.5 per cent and have been edging lower since the end of March - allowing growth stocks to catch some bid in recent weeks. The calm shows markets are broadly in tune with what the Fed’s views so far, but this can shift if the Fed acts too early or delays too long. Indeed, today’s Bank of America fund manager survey shows 72 per cent think inflation is transitory, which pretty much tells you all you need to know about market positioning. The bottom line: “investors bullishly positioned for permanent growth, transitory inflation & a peaceful Fed taper via longs in commodities, cyclicals & financials,” the FMS report says. On the Fed and policy, 63 per cent expect the Fed to signal a taper Aug/Sept; US infrastructure spending now seen a bit lower at $1.7tn and expectations for a steeper yield curve are at their lowest since Aug 2020.