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Opinion
John Authers

The Psychology of 7% Is Hiding Other Inflation Data

This year’s sudden market moves reflect traders undershooting and overshooting to find their way through the prospect of rate hikes.

Jerome Powell tells the Senate banking committee that the Fed will prevent inflation from becoming entrenched.

Jerome Powell tells the Senate banking committee that the Fed will prevent inflation from becoming entrenched.

Photographer: Graeme Jennings/Washington Examiner
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Let’s not get ahead of ourselves. And let’s not make things too complicated. Last week saw a sharp change of market direction. The first two days of this week have seen a shift backward to acknowledge the earlier move might have been overdone. Explaining the big trading rallies of the past two days in terms of new facts that emerged during them looks close to impossible. Explaining what has happened so far, with only a few more days’ extra context, is quite simple. This is how real 10-year yields have behaved so far this year, along with how Russell’s U.S. Value index compared to its Growth equivalent: