US futures traded lower on Tuesday, suggesting that markets will take a breather after a crisis of volatility in both stocks and bonds.
S&P 500 futures fell below 0.1%, indicating a warm retreat for the broad market index after rising on Monday, the best day in June. Nasdaq-100 futures ticked 0.1% less.
Investors say their focus is on central bank officials for clues as to how monetary policy may change along the way. This will determine their appetite for government bonds and inflation-adjusted returns. A flood of light money from the Federal Reserve since the pandemic hit last spring helped reduce bond yields and fueled a rally in the stock markets for much of last year.
This phenomenon seems to have stopped in recent weeks: money managers have adjusted their portfolios in anticipation of an economic recovery and a potential rise in inflation, leading to a sale of government bonds. Yields rose last week as bond prices fell, leading to nervousness in stocks. Bond markets have stabilized since then and stocks have risen for several months.
“Only yesterday did we catch our breath,” said Fahad Kamal, chief investment officer at Kleinwort Hambros.