Tame inflation data and the bond market signal that the yield trade is yet to run its course

Sam Ferraro

Global Founders Funds Management

Tame inflation data and the bond market signal that the yield trade is yet to run its course. As with most macroeconomic releases, there was something for everyone in today's December quarter CPI; a weaker than expected headline number but stronger than expected core number. My interpretation is that the inflation data does not pose an obstacle to further policy easing for an economy that has been stuck in a nominal recession since 2011, where animal spirits remain dormant and labour market conditions continue to deteriorate. The tame inflation print, record low bond yields and the fact that valuations of high yielding stocks with strong earnings stability are not stretched, suggest that the prospects of a near term cyclical rebound are remote and that the yield trade has yet to run its course. (VIEW LINK)


Senior Portfolio Manager
Global Founders Funds Management

Managing Director of Global Founders Funds Management, Sam has over 20 years experience in financial markets, with Merrill Lynch, JBWere and Goldman Sachs.

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