Explaining The Stock-Bond Divergence

The perception that central banks have turned even more dovish has pushed down global bond yields, while also giving stocks a lift. Looking out, bond yields are likely to edge higher as investors begin to focus more on the outcome of easing measures: Higher inflation. As long as yields rise gingerly and in the context of firming economic growth, global equities will remain reasonably well supported. Equity investors should favor the euro area, Japan, and China.