Investors can take a break from the wild swings in the market.
Wall Street forecaster Jim Bianco expects equities to get a boost this spring as yields on 10-year government bonds on the benchmark will temporarily decline.
“The short-term forecast is that it will be oversold, and it is likely to rally – meaning we would have falling prices,” the president of Bianco Research told CNBC’s “Trading Nation” on Friday.
He predicts the decline will benefit indices, including the tech-heavy Nasdaq, which has been rocked by rising interest rates over the past month. The Nasdaq is particularly vulnerable to interest rates because technology is considered a long-term asset like Treasurys.
“The stock market will certainly pretend to be a relief,” said Bianco.
Ten-year yields ended the week at 1.70% and is up nearly 89% so far this year.
“Maybe we can see it fall back to 1.50 [percent]”Added Bianco.” But I would consider that nothing more than a reprieve in a longer term move for higher yields. “
Bianco, who cites inflation as his major concern for 2021, predicts it will warm in the second half of the year as a result of a strong economic recovery coupled with a record amount of federal coronavirus aid.
“Checks of $ 1,400 are coming into bank accounts today. Literally today, now,” he said. Monday, President [Joe] Biden said one hundred million checks will be mailed. “
By later this year, Bianco is concerned that it will be next to impossible to avoid sustained inflation for the first time in a generation.
“The trend towards yields will be push-pull year round,” said Bianco. “We can hit 2.50 [percent] in the next 12 months. So about 75 basis points higher. “
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