Investors continued to vacillate between optimism on economic recovery and fear that the very recovery would also portend higher inflation. For now, market narratives are still divided on whether the current high inflation rate is transitory or will be stickier than expected. The latter will force central bankers to start tightening monetary policies sooner than the prevailing expectations. As a result, markets are seeing more volatility. A case in point: After falling sharply the previous Friday, US stocks rebounded quickly at the start of last week — recouping all losses and then some.

Despite the sharp swings in sentiment, however, the broader market is moving inexorably higher. Notably, high-growth tech stocks seemed to have regained favour with investors, at the expense of value and cyclical stocks. The Nasdaq Composite index hit fresh all-time record-high levels last week. Meanwhile, the broader Standard & Poor’s 500 index is just a hair’s breadth away from its record high.

As we have written, the outlook for US stocks is positive in the short term given the pace and strength of the country’s economic reopening. States have been progressively lifting restrictions as vaccination rates rise. More than 53% of the US population have now received at least one vaccine dose, with 45% fully vaccinated.

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