The Rate-Related Sell-Off Isn’t As Bad As It Looks

March 5, 2023 –


  • Inflationary fears have reasserted themselves among investors in the last month.
  • This has led to an upward revision to the Federal Reserve’s target rate trajectory, increased Treasury yields, and lower stock prices.
  • The data supports a more sanguine view of inflation, as headline inflation, goods, and commodity price pressures remain tame.
  • An important tail risk is a potential feedback loop between strong economic growth and services inflation.
  • A balanced position in stocks and credit-safe (Treasury and investment grade) bonds feels like the optimal investor response.

Setting the stage

The sharp rise in interest rates in the U.S. and globally has been the dominant theme in markets over the past month. The next chart shows that U.S. 10-year Treasury yields increased by roughly 50 basis points since

int'l 10 yr rates

Global 10-year rates (Bloomberg)

spx and 10-yr

The S&P 500 index and

us inflation

U.S. inflation measures (QuantStreet, Bloomberg)

int'l inflation

International inflation (QuantStreet, Bloomberg)


Treasury breakeven rates (QuantStreet, Bloomberg)

retail inv

Retail inventories year-over-year growth (QuantStreet, Bloomberg)


S&P Goldman Sachs commodity index (QuantStreet, Bloomberg)

svc infl

Services inflation ex shelter (QuantStreet, Bloomberg)

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