Don’t count White House Economic Adviser Council member Jared Bernstein in the same field as over-concerned investors, concerned that the $ 1.9 trillion COVID-19 relief bill will drive a strong stretch of inflation this year (and perhaps hit the stock markets).
“It is important to distinguish between heat and overheating. Nobody in the White House is arguing that there is no zero risk of price pressures, that would be irresponsible. It would be something that we obviously wouldn’t do because any economic policy involves risk. you have to do is risk management. You have to examine the risks of doing too little against the risks of doing too much. Now the risks of doing too little are extremely limited, “explained Bernstein at Yahoo Finance Live.
Bernstein said it is more important to obtain economic stimulus in the system to help improve the unemployment rate of blacks, those who are long-term unemployed and others who receive unemployment insurance. He argued that the economy’s capacity is “much greater” than many people, currently concerned with overheated inflation, realize.
Said Bernstein: “So, if you put it all together, we think we’re looking at the heat [regarding inflation/economy], do not overheat. “
Suffice it to say that those concerned with inflation continue to control the stock markets now.
The 10-year Treasury yield has risen from around 1.07% on February 1 to 1.56% today. Investors concluded that with a strong economic recovery at the end of this year, as more people receive the COVID-19 vaccine, inflation will return. This in turn will encourage the Fed to raise interest rates faster than expected and then depress stock prices.
To that end, the 10-year income eclipsed 1.6% in the immediate aftermath of the employment report better than expected in February on Friday. The non-farm payroll increased by 379,000 in February, up from the expected 200,000. The unemployment rate fell to 6.2%, improving unexpectedly from 6.3% in January. Private payrolls increased by 456,000.
The stock initially fell with the news amid the mentioned inflationary concerns, adding more pressure to technology stocks that were already on the rise, such as Tesla. Although stocks have rebounded since then, markets were ugly last month as yields rose: the Nasdaq Composite and S&P 500 fell 7.5% and 2%, respectively.
Most of the economists with whom Yahoo Finance spoke recently are in Bernstein’s field on inflation and believe that the 10-year increase in earnings is exaggerated. If this proves to be correct this spring, stocks could recover their upward trend.
“When we look at the slack in the job market, there is a big slack in the job market,” recalled KPMG’s chief economist, Constance Hunter, on Yahoo Finance Live.
Brian Sozzi is a general editor and anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi is at LinkedIn.
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