(Bloomberg) -- The US equity market rebound can keep confounding skeptics as inflation trends lower, according to global investment strategist at Deutsche Bank AG’s private bank Dirk Steffen.
“This could go on a little bit longer, actually, in terms of positive market reaction” to the signs of cooling price pressures from a softer-than-expected US inflation reading for July, Steffen said in an interview. That’s likely the first in a series of downside prints in part on lower commodity prices, he said.
The S&P 500 has jumped almost 15% from a June low, more than double the climb by global shares outside the US in the same period. The rally has defied naysayers as investors who earlier fled equities, rattled by Federal Reserve interest-rate hikes, find the gains harder to dismiss as a bear-market bounce.
The S&P 500 is set for a fourth straight weekly advance, the longest such winning run since November 2021. The gauge on average rose 3% over two months after similar streaks in the past three years, data compiled by Bloomberg show. US futures gained 0.3% by 7:09 a.m. in New York on Friday.
Cooling inflation has encouraged bets that the Fed can swivel to less aggressive monetary tightening and manage a soft economic landing. Steffen said the US Treasury market might stabilize after a prolonged period of volatility, bolstering the outlook for equities.
“For the next few quarters, we might get some stabilization on the bond market,” he said. “And that then would be a driver for growth stocks. We like the US markets, we like growth a bit more than maybe three months ago.”
The latest data from EPFR Global showed that investors piled into stocks and bonds in the week through Aug. 10, with US equity funds seeing the biggest inflows in eight weeks, while rate-sensitive growth funds posted the largest influx since December, according to Bank of America Corp.’s note.
(Updates with today’s market move in the fourth paragraph)
©2022 Bloomberg L.P.