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The Money-Manager Feud of the Year

NEW YORK ( TheStreet) -- The rally in both bond and equity markets is causing debate among money managers over which type of fund will ultimately do better.

SPDR S&P 500 (SPY) reached record levels last week after closing above 192 on Friday. The index had been in a consolidation pattern since March, but broke higher after optimism of stronger second-quarter economic growth pushed investors back into equities.

Meanwhile, iShares Barclays 20+ Year Treasury Bond (TLT) continues to make yearly highs, pushing rates to their lowest levels in 11 months. Coming into the year, investors thought that reining in monetary stimulus would lead to a bear market in Treasury bonds. So far, those investors have been wrong, and short-covering has ensued.

Both equity and bond investors have gripped tightly to their investment thesis in 2014, and bid each market higher.

This week, however, will be a telling moment for which camp is trading in the right direction.

The European Central Bank, which will meet on Thursday, is expected to offer some form of stimulus package to reignite the region's falling inflation.

At the last policy meeting in May, ECB President Mario Draghi said that the central bank was "comfortable acting in June" if updated economic forecasts merited that. The press conference raised market expectations that the ECB would act boldly, and with the recent monthly inflation reading showing a 0.7% acceleration in May, action may be needed.

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