The attached note looks at relative strength of share markets at a time when bond yields have fallen sharply on the back of concerns about the threat to economic activity from Delta coronavirus outbreaks amongst other things. The key points are as follows:
Bonds and shares often diverge – we saw this a year ago with shares rallying but bond yields staying low.
Shares have been boosted by strong earnings news, improved valuations, investor awareness of last years’ experience of a post lockdown bounce back, vaccines providing optimism in a more sustained reopening, some pressure for more stimulus & M&A activity.
While shares remain vulnerable to a correction, the trend is likely to remain up.