A number to assess the direction the economy is taking

“You just have a lot of sand in the gears that slows or reduces the momentum for recovery,” he added, highlighting requirements for vaccines in restaurants and other measures. “We think a lot of this is reflected in recent prices,” he said of the drop in yields.

Delta’s impact, much larger outside the United States, is also weighing on the outlook for global growth. Resurgent infection rates in Japan, South Korea, Indonesia and Vietnam have resulted in further restrictions, possibly delaying the recovery of global supply chains.

“Setbacks in Asia could spill over to the United States at a time when supply chain disruptions are already the most severe and widespread in decades,” Goldman Sachs analysts wrote in a published memo. last week. They added that such difficulties in the supply chain were one of the main reasons economic growth in the United States was slower than expected in the second quarter.

But Delta is not the only economic disappointment in recent weeks. Investors are now seeing the flow of spending from the federal government, which supported the economy last year, is slowing rapidly. Income growth and consumer spending, which surged last year thanks to giant transfer payments from the government, are stabilizing. Savings rates, which were also boosted by stimulus payments and unemployment benefits, fell as government stimulus checks were spent.

The government’s central role in sustaining the economy was back in the spotlight on Tuesday, when the Senate passed a bipartisan infrastructure bill worth around $ 1,000 billion. The yield on the 10-year note hit its highest level since mid-July, at around 1.35%, well below the highs at the start of the year.

But not everyone agrees with the story the bond market seems to tell.

“I just don’t buy it,” said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. She pointed out that business activity typically declines sharply in August, when many Wall Streeters go on vacation. When trading is limited, prices in the bond market can reach extremes that could exaggerate the extent of the downturn in the economy that investors predict in the future.

At the same time, the stock market continued to perform well, with the S&P 500 rising about 18% in 2021. While stock investors don’t seem overly concerned about slowing growth, some of the Activity in this market is in part the result of lower yields in the bond market. Low bond yields translate into meager interest payments for bond investors, leading some to invest their money elsewhere. The stock market is the most obvious option.

“You see a lot of people just saying I can’t buy bonds, so I have to buy stocks,” said Amy Raskin, chief investment officer at Chevy Chase Trust, a Maryland-based investment management firm. . “Equity allocations are rising higher and higher. “

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