Morgan Stanley dykker ned i diskussionen om stigende renter og overophedning. Stigende renter kan føre til udsalg af obligationer, der rammer aktierne, men kun hvis økonomien er usund, og det er den ikke. Banken ser ingen tegn på udsalg af obligationer. Markedet kan leve med en højere rente og en højere inflation, når der kommer et økonomisk opsving, og der er ikke udsigt til en overophedning foreløbig, mener Morgan Stanley.
The Risk of Rising Rates
The talk of the market at the moment is interest rates. The fact that they’re rising, and whether this will be a problem for other markets. As we’ve discussed on prior episodes of this program, I’m relatively relaxed about this risk, as there’s a lot of historical evidence that markets can do just fine if yields are rising because the economy is getting better.
But this remains a contentious debate. And with my colleague Michael Zezas expecting the Biden administration to pass its American Rescue Plan by mid-March, I’m getting more questions about whether the pendulum might now be swinging too far, with all of that fiscal support creating growth and inflation that’s too strong for the markets liking. So here’s what I’m focused on.
First, there’s an actively traded market in expected US inflation. These expectations point to higher inflation over the next five years, but then, importantly, lower inflation in the years after. So far, these markets aren’t suggesting that things get out of hand, but rather, are pricing in a scenario for inflation that we think the Federal Reserve will be quite happy with: a near-term overshoot, followed by normal levels over the long term.
Another signal we can follow is expected bond market volatility. Expectations that bond yields would get much more volatile would be worrying and consistent with the idea that bond problems would spill over into other markets. But again, we don’t see this. Bond market volatility has moved up a little, but is still close to a 10 year low.
Finally, rising yields could be disruptive if they cause a self-fulfilling pattern of weakness. As bond yields rise, bond prices fall, and those falling bond prices could cause investors to sell their fixed income holdings – begetting even more weakness. This was a fear that we saw quite a bit of as yields rose in 2015.
But again, so far we just don’t see this pattern. My team tracks flows in Exchange Traded Funds pretty closely, and so far relatively little money has been pulled out of US bond funds. Moreover, my colleagues believe that there will be demand for bonds at higher yields from US pension funds and overseas buyers. That won’t prevent yields from rising, but it will, hopefully, limit the pace.
The question of higher yields and economic overheating is a hot topic, and will remain so. Based on the indicators that we’re following, however, we don’t think that it’s a serious problem yet.
