Inflation is hot now, but investors are betting it won’t last – .

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Inflation is hot now, but investors are betting it won’t last – .


Investors are betting the inflationary streak that has driven prices up on everything from used cars to lumber will fade in the years to come, a reassuring sign for markets struggling to find direction.
Few issues have upset fund managers as much this year as inflation. As the global economy has recovered, the prices of goods and services have risen, in many cases much faster than economists expected. Labor shortages and supply chain disruptions plaguing the global shipping industry have added to inflationary pressures.
The trend has worried many investors as inflation can weigh on companies’ profit margins, putting pressure on stock prices. It can also eat away at the purchasing power of fixed yields on government bonds. In the coming days, investors will be able to check out new economic data, including factory orders, vehicle sales and the monthly employment report.
Still, the markets are starting to signal that investors may become less fearful.
Take the equilibrium rate. Calculated by measuring the difference in yield between treasury bills and their inflation-protected counterparts, or TIPS, the equilibrium rate shows how much traders anticipate inflation over a period of time. Since peaking for the year in May, the equilibrium rates on five-, seven- and 10-year Treasuries have all fallen, suggesting traders expect inflation to moderate over the years. future.

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