Two US drugmakers, Pfizer and Moderna, recently announced positive results of their respective experimental coronavirus vaccines, triggering hopes for a rise in inflation and the global economy returning to normalcy in 2021.
“Vaccine should ultimately be a boon for gold bugs, as the Fed could keep nominal rates capped while inflation expectations could firm further as a result,” TD Securities strategists wrote on Wednesday.
While the US stocks have rallied to record highs on vaccine news, the inflation expectations have barely moved. The US 10-year breakeven rate, the bond market’s gauge of long-term inflation expectations, remains steady near 1.7% versus 1.73% prior to Pfizer’s announcement on Nov. 9, according to data source St. Louis Federal Reserve.
With the bond market pricing little rise in inflation on vaccine optimism, the equity market may be running ahead of itself.
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