Global markets adapt to a change in the Federal Reserve’s tone

FOR SEVEN months most investors have been singing the same uplifting song. Since Pfizer and BioNTech published the successful results of trials of their covid-19 vaccine last November, the way to make money in markets has been to bet on a roaring rebound in the global economy, as pent-up demand for all the things the pandemic denied people—holidays, dining out, shopping—was unleashed. This “reflation” trade lifted the prices of commodities used in construction, such as copper and lumber, to record heights. It lifted global stocks, especially the share prices of firms hardest hit by the pandemic, such as cruise operators and retailers. The currencies of emerging economies, which tend to benefit more than most from global economic strength, rallied against the dollar and the euro. Bond yields climbed, along with expectations of speedy growth and higher inflation.