The US consumer price index surged in April, reflecting a surge in demand as a result of the easing of the epidemic and higher prices as a result of supply bottlenecks. At the same time, 10-year yields on US Treasuries soared.

According to data released by the U.S. Department of Labor (Labor Department), CPI rose 4.2% in April from a year earlier, the highest since September 2008. On a seasonally adjusted basis, the consumer price index rose 0.8% in April from March. The index measures how much consumers pay for goods and services, including clothes, groceries, restaurant meals, entertainment and vehicles.

Edward Parker, chief investment officer of Brooks Macdonald, a UK investment firm, said: "the market is highly concerned about headline and core inflation. People worry that if there are signs that the inflationary background is indeed becoming more persistent, the Fed will lose control. "

In March, Biden signed a $1.9 trillion economic bailout bill, writing checks for $1400 for most Americans. He also has plans to increase government spending on employment, education and social security. However, this has led to the accumulation of savings, which are being consumed as the economy reopens, pushing up prices.

In the 12 months to march, u.s. inflation reached 2.6%, exceeding the fed's 2% target, amid fears that the fed might cool down by raising interest rates. Similar concerns exist in other economies, but central banks have so far played down risks.

Signs of rising inflation put pressure on stocks this week. Rising commodity markets, supply chain disruptions and recruitment difficulties have prompted some investors to expect a long-term rise in consumer prices.

That could lead to an early increase in the Fed's short-term interest rate target, which could continue to put pressure on stocks and other assets that have benefited from near-zero borrowing costs for more than a year. Several Fed officials have said the economy still needs to be supported by low interest rates.

But one of the most important questions facing investors today is whether the current frenzied inflation is temporary, as the Fed believes, or marks a historic shift. In any case, the current inflation problem has begun to dominate the trend of capital market prices.

Assets that rely on distant future returns will be hit by fears of an inflationary spiral, while assets with fixed returns, such as bonds, will generally be hurt. The yield on the 30-year Treasury note has risen from a low of just over 1 per cent at the height of the panic in March last year to 2.3 per cent now, but the apparent slight rise masks a price loss of more than 20 per cent because of the longer maturity of the bond.

A similar situation applies to growth stocks. Growth stocks promise greater profits over a long period of time, so they look less attractive in an inflationary environment. This provides another source of support for value, which tends to provide a more direct return.

But if the inflation problem continues to ferment, value stocks may also be affected. In general, companies with demand for products can raise prices at any time to attract premium valuations. But when prices are rising everywhere, weaker, less popular companies can also price more aggressively, and pricing power becomes less important. In such an environment, there is no point in paying a premium for pricing power.

Recent economic data show that companies are paying higher prices for raw materials because of supply shortages and are raising prices to make up for rising costs. 'If inflation is real, the Fed could be forced to raise interest rates faster than expected, or faster after it starts, 'said Bill Dudley, the head of the Federal Reserve Bank of New York. In general, higher interest rates are bad for growth stocks because they increase the "discount rate" used to assess the value of their stocks and reduce the value of their future cash flows.