Rice and Fries said:
Farmer @ Johnsongrass, TX said:
https://www.marketwatch.com/articles/dont-be-fooled-by-aprils-inflation-jump-its-being-driven-by-reopening-quirks-51620847392?mod=mw_latestnews
This article explains it all. I'm going to sleep better tonight.
There's a lot of people being fooled. <laugh/cry emoticon>
<*sarc>
I want to point out one thing to this board....
Has anyone looked at the 10YR UST today? These typical sell off or fear's drive people into treasuries and we see the yields go down. But in fact, they aren't going down but instead are going up, with the 10YR up 8bps today. I'm not an expert on what that means, besides pointing out - people/investors/entities are still getting out of the markets and they aren't driving to safe havens. So where is that cash going?
Great point!
My opinion is, ...
Cash is in patient hands waiting to enter quality (bonds).
Monetary policy shows continued support from FED. In April the Federal Open Market Committee (FOMC) voted to keep the federal funds rate at 0% to 0.25% and continue the asset purchase program at a pace of $120 billion per month ($80 billion Treasury and $40 billion agency mortgage backed securities (MBS).
Bond buyers see the Fed prop, know equities are expensive, understand that the stimulus is delaying a workforce from returning to their job, see supply chains in disarray, and pointedly understand that JPOWELL is focused on 10 million Americans out of work, has a desire to allow inflation run past 2% before considering to remove policy accommodation. As inflation continues beyond 2% and the economy continues a very strong growth rate, JPOWELL will find it increasingly difficult to keep asset purchases at $120 billion per month and the Fed funds rate at basically 0%. "Rate hikes" will become more of the rhetoric from the FOMC members at speaking engagements. Rates begin to rise/bond price falls (all the while equities are under pressure chipping away the veneer of this Administration's real policies) and at some point the transition is made by patient money entering into bonds at higher rates (almost a slow squeeze). I can see this as a slow roll to quality versus a flight to quality. It pays to wait this out.
The rotation from Tech/Growth stocks to Value will have been repositioned. Growth/Tech suffers in a higher inflationary period while Value becomes the better choice in equities and that's how we finish the year.
Right now I think 2022 could be a real disaster for this Administration if they continue with their additional Stimulus and New Green Deal, etc., I would rather see a limp than a disaster.
