We expect US equities to remain bond-proof

Although last week’s pull-back in the S&P 500 coincided with a big increase in the 10-year TIPS yield, we don’t think this marks the start of prolonged period of weakness in US equities driven by government bonds. Our view is that the S&P 500 will resume its rise as the sell-off in TIPS runs its course and the equity risk premium (ERP) shrinks.

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