By Cormac Mullen, Bloomberg Markets Live commentator and analyst
Aggressive Fed hiking bets are reaching fever pitch, threatening to put the squeeze on the strong growth narrative.
Eurodollar traders now expect the guts of 4 rate hikes this year, a shift which has helped drive Treasury yields higher this month. The prospect of a March hike was close to a coin toss heading into the end of 2021 and now it’s almost fully priced in.
But Monday’s U.S. stock market convulsions showed the sheer pace that rates traders are moving can just as easily be a headwind as a tailwind to the recent reflation rotation.
It was the highly-valued growth stocks of tech and healthcare that led a strong intraday rebound with economically-sensitive value shares ending the day lower. Notably industrials and materials stocks were the worst-performing sectors.
That suggests some stock investors too are beginning to worry about a Fed hiking cycle getting out of control — and ultimately weighing on the U.S. economic recovery.
