What do investors expect from a post-pandemic economy?
They generally seem quite optimistic. Stocks are hitting records. Meanwhile, yields on U.S. government bonds and certain derivatives are suggesting the economy will be strong enough for the Federal Reserve to start raising short-term interest rates by 2023 and keep going for a couple of additional years.
In essence, investors are betting that a combination of government stimulus and coronavirus vaccines can drive a quick return to the economy that existed just before the pandemic. Back then, a decade of slow, steady growth had finally started to produce meaningful gains for even low-skilled workers.
Still, investors seem skeptical of an even-better outcome in which the economy’s capacity for growth is lifted by favorable demographic changes, technological innovation or government investment. Here is a closer look at investors’ bets on the economy:
Investors’ optimism about the future is apparent in stocks as well as bonds. Major indexes have continued to climb this year even as Treasury yields have shot upward, another sign of investors’ confidence that the economy can withstand higher interest rates.
Read More: What Wall Street Is Telling Us About the U.S. Economic Outlook