Wall Street Warns Dovish Wishful Thinking Banished, Bear Market Continues – Bloomberg

Bargain-hunting investors, who believe the hawkish season of global central banks has reached its peak, were reminded on Tuesday that they are playing a dangerous game.

The S&P 500 stock index saw its biggest growth since April 2020 in the two days leading up to the 4th, attracting traders betting on the possibility of a dovish turn in the US Federal Reserve, but temporarily fell 1.8% on the 5th. After that, although the decline was narrowed and ended at 0.2%, the President of the Federal Reserve Bank of San Francisco Daly denied the view that a change of attitude was near, and the reserve bulls were warned.

Indeed, recent events in the UK and Australia will require monetary officials to weigh their hawkish tendencies against the risks to economic and financial stability. But precisely because the credibility of policy is being tested at a time when price pressures remain at their highest level in decades, the Federal Reserve is about to push for its most aggressive tightening in recent years.

This suggests that the real inflation-adjusted 10-year US Treasury yield could easily rise again, triggering a sharp decline in risk assets sensitive to interest rates such as credit and equities.

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