Treasury yields imply a longer Fed campaign rather than more aggressive rate hikes: Krosby

This week’s data on retail sales and the consumer price index were better than expected, which caused stocks to go down and Treasury yields to go up.

According to LPL Financial’s senior global strategist Quincy Krosby, the statistics and market reaction may not indicate that the Federal Reserve will implement more aggressive interest rate hikes.

“The cyclical direction of the equity market has remained intact, but the rise in Treasury rates indicates a longer Fed timeframe, but not necessarily a return to a more aggressive rate hike campaign,” she said in a note published on Wednesday.

She said that the move to a longer schedule may be significant for the market’s outlook.

“As long as the market is supported by faster economic development, cyclical industries, such as technology, can continue to lead the market upward, even with higher interest rates,” Krosby wrote.

“If the cyclical focus shifts back to a more defensive stance and consumer staples start to lead again, it will be clear that the chances of a big economic downturn are going up,” she said.