“We’re not expecting the pace of change in real yields to be material enough to impact equity prices” over the course of the year, allowing for daily and even weekly moves, Thiel said in an interview. “To suggest that the selloff (in yields) has impacted tech prices, I think is missing the wood for the trees on where we are in real yields.”
Still a strong U.S. labor market may put the Fed on a faster tightening path and that’s causing unease in the most richly-valued echelons of the stock market.
The risk is “that the Fed much more aggressively says, ‘we think real rates of interest are too low,”’ Morgan Stanley strategist Andrew Sheets said in an interview. “They’re going to sound more hawkish and that should bring inflation expectations down. That should bring interest rates up—both sides of that should raise the real level of interest rate. That’s generally worse the more expensive you are as a stock.”
—With assistance from Justina Lee and Vildana Hajric.
This article was provided by Bloomberg News.