The Fed is under intense pressure to “do something”. Money markets keep ratcheting up and bringing forward expected Fed rate hikes as one-year inflation expectations go vertical. Consumers are spooked by a rising cost of living. Yet, under the surface, long-term inflation expectations are grounded, judging from 10/2-year breakeven spreads and 5-year, 5-year forwards. Inflation relief is not imminent, but that could be the big theme for next year. Among the winners: Big Tech, homebuilders and energy stocks.
November 22, 2021