Written by Sid Mohapatra
We continue to witness a grappling battle between risk-free rates and risk assets wherein interest rates dictate the pace, change, and direction of risk assets. Market participants are wary of the uneasy financial reality of higher rates causing meltdowns in equities with the most prominent example being the tumultuous drop in December 2018 fueled by the prospects of tightening interest rates by Fed Chairman Jerome Powell in 2019. Most trend-following algorithms continue to recycle risk and exposure from tech stocks to recovery-themed stocks as evidenced by the Dow relative performance to the tech-studded NASDAQ throughout the week.
In any event, after sharp and steady gains over the past year, the stock market’s mood may feel like it is changed in recent days with the conversation shifting from reopening and stimulus to inflation and interest rate risks. TSX closed at 18,381 posting an impressive 1.8% and a YTD gain of 5.4% while down south the S&P 500 eked out a 0.8% weekly gain and being up 2.3% on a YTD basis.