Wall Street's biggest fear is not Covid. Inflation

New York (CNN Business) Coronavirus fears have rocked Wall Street to the point where it last March.

source: https://ibb.co/ZNQ4RKB

The Dow crashed nearly 3,000 points - an astonishing 13% - last year today.

Flash is up for 12 months and the health problem is not over, but investors are becoming increasingly confident that it will be soon.

For the first time since February 2020, Covid-19 is no longer the 1st fear among portfolio managers tested by the Bank of America, the bank said on Tuesday.

If any, experienced investors are now concerned that the economy could recover so rapidly that it is too hot.

Inflation has now become a major risk factor noted by portfolio managers voted by the Bank of America. The second most common annoyance is anger, which occurs when markets are more busy than receiving a bond yield.

The findings underscore how dramatically the situation has changed over the past year. Confidence is growing as a result of policy initiatives, security cuts and unprecedented support from the coalition government.

"Investor status is inexplicably high," Bank of America strategists wrote in a report on Tuesday.

American stocks were quickly discovered in the epidemic. The Dow decreased by 18,592 on March 23. The index has risen 77% since then. Nasdaq doubled that time.

A hot economy for decades

Economists are also very optimistic, especially since Uncle Sam provides more economic support than many thought possible in the past few months. Last week, Congress passed President Joe Biden's $ 1.9 trillion American Rescue Package.

Goldman Sachs now wants the US economy to register China-like GDP growth of 7% year-on-year by 2021. That will be the fastest in the United States since 1984. 8% higher by the end of 2021, compared to the end of last year. At that rate, it would be the fastest GDP growth since 1965.

About half (48%) of the US Bank's voted fund managers now expect a V-made recovery, from the only 10% predicting that by May 2020.

A record 91% of high-profile investors expect a strong economy, surpassing the confidence signed after Trump’s tax evasion in late 2017 and during the early recovery period in the Great Recession.

Inflation fears an increase. But have we missed it?

But all of this reliance - in addition to the unprecedented encouragement of Congress and the Fed - has made some on Wall Street concerned that the economy could be overheated.

The biggest fear that recurring inflation is causing the Federal Reserve to sharply raise interest rates, accelerating economic recovery and market growth. That was the case in the 1970's and early 1980's when a major bank led by Paul Volcker eased inflation through rising interest rates.

A record 93% of fund managers expect the highest inflation in the world in the next 12 months, according to the Bank of America. This is up from 85% saying that in February.

However, US officials have stepped back in their fight against fears of inflation. Over the weekend, Finance Secretary Janet Yellen said inflation could rise sharply, but only temporarily.

"Finding a stable inflation rate as we were in the 1970s, I don't expect that," Yellen told ABC.

Ed Yardeni, president of investment advisory Yardeni Research, is not overly concerned about the escalating inflation rate as the estimated 10 million American workers are out of work due to the epidemic.

"The rise in the price of the 1970s is now impossible, in our view, despite the excesses in our government," Yardeni wrote in a letter to customers on Tuesday.

The point of obtaining the bond yield

The corresponding risk is a repeat of the 2013 crash, when Treasury issued a spiked after the Fed indicated it would gradually reduce bond purchases as the economy recovers. Treasury high prices can make shares look relatively unattractive.

After a collapse of 0.3% last spring, the Treasury's 10-year rate has recently risen to 1.6%. The spike in the yield of unresolved investors, driving US shares very low before it returns.

So how much will the yield have to go up to get the bull market out?

The Bank of America has said 2% of the 10-year-old Treasury's "could be a share accounting rate." About half of the fund managers mentioned said a 2% harvest could result in a 10% adjustment in stock. Similarly, about half of investors indicated that the Treasury's 10-year average of 2% or 2.5% would make bonds attractive in relation to shares.

Recent actions in the financial markets have also raised concerns about bubble-like behavior. Investors invest huge sums of money in shell companies known as SPACs. IPOs increased significantly on their first day of trading. And a host of traders at Reddit has been able to make shares of GameStop (GME), AMC (AMC) and other companies at high altitudes.

Yet professional investors do not see the bubble, at least for now. Only 15% of investors think the U.S. stock market is in a shambles, according to a study by Bank of America.