The Morning Call---The beginning of the end or another meaningless shift in the goalposts?

 

The Morning Call

 

6/17/21

 

The Market

         

    Technical

 

            Wednesday in the charts.

            https://www.zerohedge.com/markets/powell-pummels-bonds-bullion-saves-stocks-grain-salt

 

            Update on margin debt.

            https://www.advisorperspectives.com/dshort/updates/2021/06/16/margin-debt-and-the-market-up-1-7-in-may-continues-record-trend

 

            Why is the VIX so low?

            https://www.ft.com/content/5020a4e1-d136-4c6a-af23-e2ef7d9b23ac

 

            Golden collapse.

            https://www.zerohedge.com/the-market-ear/c7gi1nrdwg

 

            The dollar and stocks.

            https://www.zerohedge.com/the-market-ear/cs9c5-5ll1

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

                          Weekly jobless claims totaled 412,000 versus estimates of 359,000.

 

                          The June Philadelphia Fed manufacturing index was reported at 30.7                                  consensus of 31.0.

 

                        International

 

April EU YoY construction output rose 42.3% versus +20.0% in March; May CPI came in at +0.3%, in line.

 

                        Other

 

            The Fed

 

In addition to the lousy economic stats reported yesterday morning, the FOMC wrapped up its June meeting and released its statement.  While its language was not that much different from its immediate  predecessor, there was a big change in the so called ‘dot plot’, i.e., the individual FOMC members forecasts of economic activity, inflation and interest rate policy adjustments.  Specifically, it showed that (1) inflationary expectations have risen and (2) the heightened probability of interest rate increases sooner than many expected.  That suggests that some Fed members may be less convinced that inflation is ‘transitory’ than was previously indicated; and it basically signals the beginning of ‘talking about talking about tapering’. 

              https://www.zerohedge.com/economics/fed-blinks

 

Naturally, Mr. Market was not a happy dude; and Powell tried to downplay the significance of the ‘dot plot’ in his follow up press conference.  It is too soon to tell if investors will swallow that; and too soon to know if this is the beginning of the end. 

 

On the one hand, if investors become convinced that the Fed has started to unwind QE, then they will likely discount the process much more rapidly than the actual tapering.  On the other hand, (1) according to the ‘dot plot’ its two years and $2 trillion in QE before anything of meaningful economic consequence occurs and (2) remember how many times the Fed moved the goalposts on unemployment during the financial crisis recovery period as an excuse for not normalizing policy. 

 

In short, I am not altering my economic outlook or my portfolio based on one Fed meeting and the resulting pin action.  But stay tuned.

 

            Fiscal Policy

 

              The cost of government.

              https://www.adamsmith.org/blog/

 

 

    News on Stocks in Our Portfolios

 

Microsoft (NASDAQ:MSFT) declares $0.56/share quarterly dividend, in line with previous.

 

What I am reading today

 

            Why people misperceive crime trends.

            https://www.nytimes.com/2021/06/16/upshot/murder-crime-trends-chicago.html

 

 

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