By John Bilton via Iris.xyz
In terms of the breadth of global growth, the first half of 2017 is shaping up to be the best start to a year since 2011. A surge in economic momentum in Europe and Japan, and solid corporate earnings globally, amply offset some wobbles in the hard data and a below-expectations print for U.S. first quarter growth.
Equities, unsurprisingly, posted handsome gains as a result; but even so, investor sentiment appeared more cautious than price action might imply. The decline in bond yields, however, might paint a different picture. Although bond yields and equity prices have diverged previously in this expansion, the deviation is now raising questions about the reflation trade and, in turn, Federal Reserve (Fed) policy.
Whether the level of bond yields is a warning of slowing economic momentum, or merely the result of a savage short squeeze and the third year running of negative net G4 sovereign supply1, remains a critical consideration in positioning for the remainder of 2017.
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