Coming in to the week, there was so much to focus on, so much to worry about for the media. Delta variant, new mask rules, the Fed meeting and every mega cap tech stock reporting earnings. All I heard was about the massive fireworks that would be coming. Well folks, so far, there has been nothing. Even with Apple, Microsoft and Google reporting at the same time, there has barely been a sparkler. And all three companies had stellar quarters.
That has been a common theme this month with earnings. Companies blow out on the top and bottom lines, yet the stocks don’t see positive reactions of similar magnitude. Whether you want to say that a great Q2 was already baked in the cake and priced in or that stocks are tired, I don’t care. I always say that it’s more important how something reacts to news than the actual news.
I spoke about this theme and the Fed meeting with the good folks at Yahoo Finance the other day. Of course, I am bias (and probably a little self-important), but I think the segment is really good watch.
Today ends the two-day FOMC meeting where no action will be taken. All eyes will be Jay Powell’s statement for any possible signs of thinking about beginning to discuss the possibility of cutting back ever so slightly on the Fed’s $120 billion per month bond buying binge, $40 billion of which is in mortgage backed securities during one of the hottest housing crazes ever. Gimme a break. That $40 billion should be zero.
How can Jay Powell and the other FOMC members honestly look at the public and argue that the economy remains in crisis mode and can’t survive without $120 billion being created each and every month. The markets are and have been roaring. The economy is and has been soaring. Inflation is white hot although Powell and the Fed tell us not to worry. It’s a temporary blip. 5% is the strongest since 1991, but it’s all good. Trust us, he says. No thank you, I say.
I will say this; the markets have given Jay Powell a little pass since mid-May. Each white hot inflation report has been met with bonds rallying and reopening, cyclical and reflationary sectors falling. In the short-term, he’s laughing at me. That’s okay. He isn’t the first. I have been wondering aloud if the markets are telling us that these white hot reports are inflation’s peak, at least for 2021.
Let’s get the economy and markets back to a somewhat sense of normalcy, please. And by the way, what I am advocating may result in more challenging markets in 2022 or sooner. So, I am not talking my book nor pushing for what benefits me most in the short run.
Anyway, today is Fed day and the time-tested and trusty old model says that stocks should stay in a plus .5% to minus .5% range until 2pm and then rally. I will admit, though, that the Powell Fed hasn’t seen the same model results as with previous Fed chairs.
From 2-3pm on Fed day, I always love to watch gold, bonds, the dollar and which sectors surge and fall. I will report on that on Twitter and then here again either tomorrow or Friday.
It’s laughable that Jay Powell, the Fed and too many in Congress think that we shouldn’t worry about inflation. I guess they don’t buy groceries, use energy nor embark on home improvement projects.
