Photo = REUTERS
On the 9th (local time), the S&P 500 index rose 1.4% as large technology stocks led a rebound in the US stock market. The Nasdaq Index, which peaked last month, fell more than 10% and entered correction, rebounded 3.6% on the same day. Shares of Tesla, Amazon, Facebook, and Microsoft rose 2.8-19.6%. Analysts say that technology stocks revived as the US 10-year Treasury bond rate fell 6bp (1bp=0.01% point) to 1.55%.
Data=UBS
We expect U.S. 10-year Treasury yields to remain held down and the stock market to see further gains in the coming months. The COVID-19 vaccination program, new economic stimulus measures, and continued monetary support from the world’s central banks will fuel the US’s economic growth.
The rise in inflation over the next few months will continue in the short term due to the base effect and temporary supply and demand problems caused by Corona 19. It will take some time before the US production gap narrows, and the US unemployment rate is above pre-Corona 19 levels. The U.S. Central Bank (Fed) sees official statistics underestimating actual levels of unemployment.
Meanwhile, Fed Chairman Jerome Powell stressed that a rate hike can be considered only when full employment is restored and the inflation rate reaches 2%. He added that he expects it will not reach this goal in at least three years.
We expect this policy stance to help restore stability to the bond market. The US 10-year Treasury bond rate is likely to remain at its current level until the end of this year.
However, it should not be overlooked that short-term volatility may continue to occur in the bond market as the market adapts to the transition from’recovery’ to’rebound’ and as inflation and economic growth increase.
We believe investors should be interested in cyclical stocks. It is paying attention to the financial, industrial and energy sectors that will benefit greatly from the expansion of the economic recovery. In addition, global small caps, fintech, greentech, and fifth-generation (5G) mobile communications can be attractive investment destinations.
Summary = Reporter Park Sang-yong [email protected]
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