Could The U.S. Economy Grow By 7% This Year?

She added that, despite the modest inflation numbers from the past few months, headline inflation is likely to rise somewhat dramatically over the next few months, primarily due to the base effects of very low readings from last March and April. Because of this, Roach doesn’t expect the U.S. Federal Reserve or markets to become too concerned.

Value stocks outperform growth stocks again

Equity markets performed solidly the week of March 8, Roach said, with global developed equities rising roughly 2% to 3% as of midday Pacific time on March 12. Many broad equity benchmarks, such as the S&P 500® Index and the Dow Jones Industrial Average, logged all-time highs, she noted.

U.S. small cap stocks in particular enjoyed another banner week, Roach said, due in large part to the passage of the American Rescue Plan. “These companies are particularly sensitive to the increased expectations for consumer spending that the new relief bill brings,” she stated, adding that small caps rose approximately 6% on the week.

Peering under the hood further, Roach noted that style leadership within equity markets was especially wild the week of March 8, with a tug-of-war between growth (i.e., technology and momentum stocks) and value (i.e., reopening, financials and energy stocks) as investors digested and calibrated their expectations around equity market valuations, fiscal stimulus, interest rates and inflation.

“Leadership whipsawed between growth and value nearly every day,” she remarked, noting that the Nasdaq 100 Index fell into correction territory on March 8, before mounting a pair of meaningful comeback attempts in the following days amid a decline in U.S. government bond yields. Ultimately, value stocks notched yet another weekly win over growth stocks, she said, with the yield on the benchmark U.S. 10-year Treasury note relatively unchanged from the start of the week.

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