The second quarter of the year is becoming increasingly painful for tech stocks, recalling memories of the 2000s tech bubble bursting. The repricing of a more aggressive Fed stance has been brutal, real yields rose – the rate on 10-year TIPS has turned positive for the first time since 2020 – and on the nominal yields front, the US 10-year Treasury yield temporarily reached the 3% threshold, falling close to 2.75% on economic growth concerns.
Rates are now at a level that could call for a recalibration of asset allocations. The key themes to follow to detect future market directions are:
- Stagflationary risks: The growth inflation battle is evolving unevenly at the global level, with the main theme being the shift from rising inflation and robust growth to lower growth and persistently high inflation. To account for this, our main scenario already pencils in regional divergences (technical recession for the Eurozone vs. US growth moving below potential, but no recession in 2022).
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