Today’s sizeable pull-back in the US stock market after a much brighter start to the month fits with our view that it is not yet out of the woods. We don’t expect it continue to struggle for the reasons that appear to have led to its latest retreat – namely a renewed surge in bond yields on the back of some reassuring data on the economy – in the form of the ISM services and ADP employment reports – and some hawkish Fed rhetoric. Instead, we think that equities will remain under pressure as the economy falters even after the rout in bonds ends.
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