Investors are increasingly cautious about long-duration assets amid rising inflation expectations and market uncertainty. The shift away from duration-heavy strategies is driven by the realization that the low inflation and zero-rate environment, which has supported a bull market since 2009, is no longer guaranteed. The latest UMich Consumer Sentiment Survey indicates the highest long-term inflation expectations since 2008, prompting higher long-term Treasury yields as investors demand greater compensation for future inflation risks. This rise in yields makes equities less attractive, as the discount rate for future cash flows increases, potentially leading to lower stock valuations. The increase in real yields and the term premium suggests markets are preparing for tighter future monetary policy, further reducing the appeal of risk assets.
The SPDR Portfolio S&P 500 Growth ETF (SPYG) experienced a decline, dropping 1.07% to $87.81 at 3:00 PM on Friday, January 10.