A healthy correction from overwhelming optimism

THE ongoing financial markets correction, coinciding with sharply rising 10-year US Treasury yields and fears of inflation, remains a healthy one. Markets have been overwhelmingly optimistic for some time and a pullback is to be expected.

One of the triggers for selling, ironically, is how the US economy remains very strong. Some 200,000 jobs were created in January, with the unemployment rate holding steady at 4.1 per cent. But markets pounced on a 2.9 per cent year-on-year monthly wage growth, the fastest rise since 2009.

One concern here is that rising wages at the late stage of the economic cycle, without an equivalent rise in productivity, will pressure company margins, as Bank of Singapore chief economist Richard Jerram said in a Monday note.