My wife, Sari, was born with a lead foot.

By all rights, she should have accumulated a bountiful harvest of speeding tickets over the course of her career. But she understands how the system works.

If she is, for example, buzzing along at 75 in a 55 mile-an-hour zone and sees the state police ahead, she dons a sunny smile and gently taps on the brakes. This action, of course, still leaves her well above the limit. However, for some reason, the police seem to appreciate the gesture as a respectful acknowledgement of the majesty of the law. Speeding more slowly is apparently regarded as akin to not speeding at all.

Financial markets also seem to pay inordinate attention to the second derivative. No one can dispute that the economy is growing rapidly or that inflation is unusually high. However, just a hint of deceleration in some recent data has been seen as a rationale for yet another lurch down in long-term interest rates from already bewilderingly low levels.

That being said, in the long run first derivatives matter too. Even if output growth decelerates in the months ahead, it should remain well above the economy’s long-run potential, pushing the economy towards full employment, sustaining pressure on inflation and undercutting arguments for continued monetary ease. The inflation rate, even if it slows, is likely to remain higher than in the latter years of the last expansion and this should, combined with tighter monetary policy, push bond yields higher.

Data due out this week should provide some guidance on these trends.

We expect another very strong CPI report to be released on Tuesday, with sharp gains in energy prices and a continued recovery in hotel room rates and airline fares. The economy is still grappling with supply shortages across consumer markets and recently higher wage growth should be filtering through to higher consumer prices, particularly in labor-intensive service industries. Moreover, with strong employment gains likely in the months ahead as well as the distribution of monthly child tax credit payments, we expect consumer demand to continue to outpace supply, at least through the end of the year.

It should be noted that the year-over-year increase in consumer prices could slip from a seasonally adjusted 4.9% year-over-year in May to 4.7% in June, and that this could translate into a decline in the consumption deflator inflation rate from 3.9% to 3.7%. However, even 3.7% is far above the Federal Reserve’s long-run target of 2%. Some of this inflation surge should dissipate in 2022. However, given stronger wage growth, newly elevated inflation expectations and the potential for further fiscal stimulus before the end of the year, consumption deflator inflation should still remain well above 2% for the rest of the current economic expansion.

Unemployment claims could decline in this Thursday’s report, as the normal seasonal adjustment for auto-plant shutdowns may not be needed in an industry struggling to rebuild very low inventories. Labor market indicators continue to point to dramatically strong demand for workers with the May JOLTs report showing a new record 9.2 million job openings and the June survey from the National Federation of Independent Business showing 46% of small businesses reporting positions that they could not fill. As enhanced unemployment benefits are phased out and more parts of the economy return to normal, employment growth should accelerate from its monthly year-to-date average of 543,000.

In this regard, it is worth remembering that, in normal times, employment follows real GDP growth with a lag, with the full impact of stronger GDP growth only manifesting itself in employment after a few quarters. While retail sales numbers, due out on Friday, will likely show a decline from May to June due to supply constraints, they should still be consistent with almost 10% annualized growth in both real consumer spending and real GDP in the second quarter. Moreover, continued reopening of service sector industries, strong pent-up consumer demand and the need to rebuild inventories could all sustain real GDP growth of over 5% in the second half of the year, more than double the economy’s long-term growth potential.

It is in this context that investors should be wary of reading too much into the recent rally in the Treasury market, which has seen 10-year yields fall from 1.75% at the end of March to a low of 1.29% last Thursday. The pace of economic recovery may slow a little in the months ahead and inflation may ease from recently very elevated levels. However, the economy still looks set to achieve very complete recovery in the months ahead, with plenty of excess demand to sustain stronger inflation. Chairman Powell, who provides semi-annual testimony to Congress this week, will likely continue to sound less dovish in his rhetoric, as he paves the way for tapering of bond purchases at the end of this year and rate hikes at the end of next. The global economy, despite setbacks caused by the delta variant, remains firmly on a path to recovery.  

All of this should eventually catch up with the bond market, pushing yields higher. And, as interest rates rise, we should see a resumption of a rotation towards less expensive areas of global financial markets including value stocks in the U.S. and more cyclically geared equity markets in the rest of the world.   

David Kelly is chief global strategist at JPMorgan Funds.