Investor focus is shifting from inflation to lacklustre economic growth
Earlier this year, markets were most concerned with inflation and would rally on tepid economic data. That's no longer the case.The market selloff earlier this month makes it official – weak economic news is back to being bad news for investors.
When bond yields were falling and inflation was improving earlier this year, the stock market reacted positively, says Craig Basinger, chief market strategist at Purpose Investments Inc. in Toronto. Douglas Porter, chief economist with BMO Financial Group in Toronto, says investors got a “real-time lesson” in how the market has changed the way it views economic data. “It’s okay if the economy slows; it’s not okay if it tips into a downturn. There’s a fine line, and we got too close to that line for comfort.”
“You can make some pretty good moves to insulate portfolios better for this kind of environment,” Mr. Basinger says.
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