Did you know that historically, stock markets tend to perform better under moderate inflation (around 2-3%) than when inflation is very low or very high?

A little inflation is a sign of economic growth and can actually be beneficial for corporate earnings.

In today’s issue:

• Bizarrely, Inflation Worries Have Returned: First, investors are concerned about potential inflation driven by wage growth 😱

• Good News Is Bad News? Next, a strong labor report has pushed bond yields higher 🤔

• Israel Getting Ready To Strike: Finally, as tensions between Israel and Iran escalate, market jitters are increasing ⚔️

Stay informed with the latest insights to help you navigate the financial landscape. Off we go!

Bizarrely, Inflation Worries Have Returned 😱

The strong labor market report last Friday has led to a return of inflation worries.

Rather than just celebrating that plenty of jobs are being created, investors are fretting that perhaps strong hiring will lead to wage pressures and higher inflation.

These concerns are misguided ❌

Productivity growth is booming, which is supportive of strong hiring and somewhat higher inflation.

None of this is inflationary.

Good News Is Bad News? 🤔

Sometimes, good news is good news, and sometimes it’s not.

Yesterday’s trading session was a good-news-is-bad-news day, but for the wrong reasons.

The 10-year bond yield broke above 4%, signaling that investors believe that the Fed may turn cautious on rate cuts in the aftermath of the strong labor report last Friday.

Stock investors rarely like rising bond yields 👎

But soon enough, they will see that strong economic growth means strong corporate earnings, and the dip will be bought.

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Israel Getting Ready To Strike ⚔️

Last week, Iran launched 200 ballistic missiles at Israel, attempting to inflict massive damage on the Jewish state.

A retaliation is coming, perhaps even in the coming hours.

Markets are jittery 😬

Let’s hope Israel takes out Iran’s nuclear program—it would be good news for the democratic world.

Inner Circle Global Macro Update 🔍

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