What just happened?
The S&P 500, the world’s most tracked index, suffered a Wednesday fall of more than 4%, its worst day in two years. In doing so it set a new closing low for the selloff that began at the turn of the year.
It’s now down 18.7% from its peak.
All of this took place with no obvious big news to drive it. So how come?
To be clear, this selloff is NOT about rising fears of inflation, but about rising fears of the consequences if inflation is brought under control. Doing that could hurt.
The difference between yields on inflation-protected and fixed-income bonds, have also been testing the 3% level. In the case of the 10-year breakeven, that level was briefly passed a couple of times in April, but it has been lower than that since.
It’s too soon to say that the high is in, but the inflation-linked market is at least pausing for thought. The narrative motivating them would be that the Fed will choke off inflation much earlier than it now expects
John Authers Bloomberg 19 maj 2022
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