The U.S. elections of last November had already temporarily interrupted the market’s belief of the previous narrative. At the turn of the year, the perception was formed that tax cuts and deregulation would spur U.S. growth, which would increase earnings’ yields, subsequently leading to higher inflation and higher bond yields.
Consequently, we saw the beginning of a rotation from bonds to stocks with a consequent increase in stock prices and a drop in bond prices (Figure 3).