John Authers on a shift in the momentum as stocks gained and bonds lost ground. Comments by Fed governors, and by treasury secretary Steve Mnuchin, helped buoy confidence in growth after some disappointing economic data.
April the 20th is in the books here on Wall Street. Here's the New York minute. I'm seeing quite a reversal of the recent trends. Stocks have been strong, particularly here in the States, while bonds have been weak. Again, particularly here in the States.
Now the reason for that is rate expectations. Thanks to Fed speak, you can see that the perceived chances of a rate raise in June here in the US have gone up sharply today. Meanwhile however, if you look at the chances for three rate hikes for the year, you can see that still, there is considerably less confidence about the reflation trade, about the need for rate raises than there were a few weeks ago.
Now the main reason for that is the economic data. If you take a look at the Citigroup surprise index, which shows the extent to which recent economic data has been beating expectations, you can see that the latest round of data really has been quite underwhelming. It was important today that we heard Treasury Secretary Steve Mnuchin say that the tax reform agenda was back on track. That would obviously help growth. But we need to see data improve for the reflation trade to get back on track. And that's the New York minute.