Markets are adjusting to stubborn inflation. Election noise could spoil the calm

It’s been smooth sailing for stocks in 2024. The S&P 500 has gained nearly 15% and has been on a steady upward trend for the past two months.

Treasuries have been more volatile, thrown around by the swings in inflation data, hints about future policy decisions from Federal Reserve officials and higher-for-longer interest rates. But following a spike in yields in April and May, they’ve calmed a little and should end the first half nearly even.

The relatively benign picture for investors could be about to change, however. The Fed is preparing markets for the possibility that there could be no rate cuts this year. Add to that the noise surrounding the US election, and it could be a rougher second half.

Fed foibles: Treasury yields, which go up as prices fall, have moved higher this week as investors reacted to comments from Fed officials downplaying interest rate cut expectations.

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