Optimism for a pickup in economic activity has accelerated due to the improving data surrounding the coronavirus. Despite the risks associated with variant strains and increased transmission as activity becomes more regular, the data suggests that the worst of the pandemic may be behind us. The pickup in pace in vaccinations in the U.S. should continue as more doses become available, and more vaccines are approved.
Meanwhile, the expectation for more stimulus is aiding optimism for a pickup in growth. This week, Congress will turn its focus back to fiscal stimulus in an effort to jump-start the economic recovery. I don’t expect the stimulus package to be as large as the administration would like, but given the encouraging developments related to the pandemic, it should still have a significant impact.
With the additional stimulus and expected continuing improvement regarding the pandemic, risk markets should continue to rally despite significant valuation concerns. Bond yields will likely accelerate their rise at the long end of the yield curve. I expect this trend to continue until at least the summer.
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