Macroeconomic outlooks between bond and equity markets continue to diverge, JPMorgan said.
If the bond market is right about inflationary risk, stocks would face 20% potential downside.
But if the fixed-income market's inflationary outlooks prove right, stocks would face 20% potential downside.
"If equity markets were to price in a rise in inflation vol to levels consistent with bond markets appear to price, this would imply around 20% downside from current levels," analysts said.
But, in the case that bond markets are able to look past inflationary risk, JPMorgan expects that yields of 10-year Treasurys would drop by around 70 basis points.
Persons:
—, Ed Yardeni
Organizations:
JPMorgan, Service, Federal