Rising Rate Ructions

At which point do rising rates and inflation start becoming a problem for equity markets?

Bond markets have started to price in prospects for higher growth and inflation, anticipating re-opening economies, rampant fiscal stimulus, and dovish central banks. Indeed, nominal 10-year rates in the US have risen by well over 100 basis points since their low in 2020; 10-year inflation breakevens by even more; and most recently, real 10-year rates, i.e., nominal 10-year rates minus implied inflation, while still negative, have started to rise too (Figure 1).

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