The attached note takes a look at the upswing now underway in the bond market.
The key points are as follows:
Higher bond yields are normal in economic recovery and should not be a major problem for shares if they are matched by rising earnings. But too rapid a rise in bond yields risks driving a deeper correction in shares.
Central banks want higher inflation but will look through any short-term spike.
The 40-year downtrend in inflation and bond yields is likely over.
But the fundamental backdrop of improving growth, rising profits and still low rates supports the case for solid 6-12 month returns from shares.