What's going on?

Talk about a turnaround! American stock markets are continuing to rebound from the major losses they incurred in recent weeks � and Friday sealed their best week of gains since 2013 (tweet this).

What does this mean?

It�s crazy days on Wall Street. Back in January, billions of dollars of new investment flowed into US stocks, pushing up their valuations and helping markets achieve a string of all-time highs. But a correction that started at the end of January (related in part to a selloff in the bond market) saw nearly $3 trillion in the value of major American stocks disappear in less than two weeks.


Yet stock markets now appear to be back on the mend, with nearly $1.3 trillion (and counting) of the erased value already regained. There�s no consensus as to what exactly is sparking this newfound confidence � for some, it�s a renewed focus from investors on positive economic data, while others point the finger to market rally FOMO.

Why should I care?

The bigger picture: The correction and subsequent rebound affected overseas markets too.

Major exchanges in Europe and Asia all saw significant drops in the recent bout of volatility, but they too have now recovered from the lows of early February. The UK�s FTSE 100 had also slumped before jumping back up by about 3% this week, while a measure of emerging market stocks grew by 6% after a recent slide of its own.

For markets: Inflation-linked volatility is probably here to stay.

While investors might be focusing on the glass half full for now, continued economic strength could cause inflation to keep accelerating, and thus push up interest rates further (both of which can put pressure on the value of investments). Even if things look calm at present, signs of increasing inflation (as well as increasing bond yields) in the weeks and months to come could set markets swinging again.