Normand Says It's Too Early in the Cycle for Inflation Surprises

The video discusses market correlations, focusing on the unusual positive correlation between stock and bond prices. Typically, these prices move inversely, but recent trends show both declining simultaneously. This could lead to high volatility if inflation surprises continue. The video also examines the potential impact of upcoming CPI reports and FOMC meetings on Treasury yields, noting that further rate hikes may depend on new signals from the Fed.

What is the typical relationship between stock and bond prices?

• They both increase during inflation.

• They are unrelated.

• They move inversely.

• They move in the same direction.

What recent anomaly was observed in the correlation between stock and bond prices?

• Stock prices are stable while bond prices fluctuate.

• Both prices are increasing.

• Bond prices are stable while stock prices fluctuate.

• Both prices are decreasing.

What could lead to a high volatility sell-off in both stock and bond markets?

• A decrease in market volatility.

• Stable inflation rates.

• A consistent increase in inflation surprises.

• A decrease in inflation surprises.

What might cause the US 10-year yield to increase by 10 basis points?

• A decrease in CPI.

• An upside surprise in the CPI report.

• A stable CPI report.

• A decrease in market volatility.

Why is the next FOMC meeting considered important?

• It will decide the next presidential election.

• It will determine the future of the stock market.

• It will set new tax policies.

• It may influence the terminal rate and interest rate hikes.