Asset Prices, Economy Are Disconnected: Morgan Stanley

The video discusses the current state of yields, focusing on why they aren't rising despite improving economic data. It highlights the role of the Fed's asset purchases in keeping nominal yields low and emphasizes the importance of real yields. The discussion also covers the impact of fiscal stimulus on asset prices and the disconnect between asset prices and economic fundamentals. Additionally, it examines inflation indicators, noting that market-based signals suggest rising inflation, which is more technical than fundamental due to ongoing demand destruction and high unemployment.

What is the primary reason nominal yields remain low despite improving economic data?

• The Federal Reserve's asset purchasing program

• Rising inflation rates

• Increased consumer spending

• High unemployment rates

How does quantitative easing affect bond yields?

• It allows bond yields to rise significantly

• It prevents bond yields from rising significantly

• It has no impact on bond yields

• It causes bond yields to fall drastically

What is the disconnect mentioned in the context of asset prices?

• Asset prices are unaffected by economic fundamentals

• Asset prices are aligned with economic fundamentals

• Asset prices are disconnected from economic fundamentals

• Asset prices are declining due to economic fundamentals

Why are market-based inflation indicators suggesting higher inflation?

• As a result of increased production costs

• Because of fiscal and monetary easing

• Owing to rising global oil prices

• Due to high consumer demand

What is the expected impact of zero policy rates on real rates?

• Real rates are expected to remain stable

• Real rates are expected to rise

• Real rates are expected to move lower

• Real rates are expected to fluctuate unpredictably