Treasury yields hit two key levels the first week of 2021. As shown in the LPL Chart of the Day, the 10-year Treasury yield moved above 1% for the first time since March 2020, and the 10-year breakeven inflation rate, a measure of Treasury market-implied inflation expectations, climbed above 2% for the first time since November 2018.

“When stocks began to rally back in March 2020, Treasury investors stayed more cautious,” said LPL Research Chief Market Strategist Ryan Detrick. “But since early August 2020 the 10-year Treasury yield has been climbing, and we think we may see more of the same over the rest of 2021

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2021 Policies Update and the Markets

In this week’s Market Signals podcast and video, LPL Research talks about 2021 policy updates and the possibilities of higher taxes and more regulation, more stimulus, higher Treasury yields, and better stock performance in 2021.

Daily Insights

Stocks Open Little Changed After Monday’s Risk-off Tone

• Nasdaq 100 leads early gains.

• Bonds yields continue to rise.

• European markets are trading slightly lower in midday trading.

• Asian stocks were broadly higher overnight with China’s Shanghai Composite

Small

2021 policy is coming into focus as Democrats win majorities in both the US House and Senate. This may mean higher taxes but also more stimulus. Treasury yields are higher, but so are jobless claims. What’s next for stocks?

2021 policy is coming into focus. Democrats are poised to take control of the US Senate, which would give them a majority in both houses of Congress. This will shift the policy outlook moderately to the left, but majorities are still razor-thin. Meanwhile, US Treasury yields are trending higher, but jobs numbers are down.

Focusing on the Future

The surprise wins in the Georg

As a result of the Senate runoffs in Georgia, Democrats are poised to take control of the US Senate, which would give them a majority in both houses of Congress. This will shift the policy outlook moderately to the left, but majorities are still razor-thin, giving moderates heavy influence. We also envision a potential move toward increased bipartisanship, which may help bring more clarity to policy in 2021.

Georgia On Our Mind 

Assuming the Georgia Senate races play out in line with the current vote count, Democrats will soon have control of both chambers of Congress as well as the presidency, at least until mid-term