by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
Author: Greg Valliere
July 8, 2021
THE GREAT WILD CARD for the markets and the economy is always confidence — and suddenly it’s slipping. Signs of anxiety are pervasive:
An outbreak of the Covid delta variant, which could keep some people from returning to work.
Fears that the economy will be only good, not great — below expectations just a few weeks ago.
Shortages everywhere, from semiconductor chips to service workers.
Consumer concerns about inflation; it’s probably transitory but gasoline and food prices have a huge impact on consumer psychology.
The inability of the U.S. to stop hacking and ransom demands that are crippling cities, hospitals, businesses, etc.
Signs of Washington gridlock on more economic stimulus, as bipartisanship wavers.
Out-of-control urban gun violence, with little hope for police reform or gun restrictions.
HOW TO PULL OUT OF A FUNK: The biggest factor, as usual, may be the Federal Reserve. Fed officials obviously are aware of the anxiety that has generated huge demand for the Treasury 10-year bond, sending yields sharply lower. This seemingly confirms what Chairman Jerome Powell has stated for many months — we’re not out of the woods yet.
SO WE ANTICIPATE A SIGNAL FROM THE FED — perhaps after the July 27-28 FOMC meeting, perhaps even earlier — that a tapering of its asset purchases is not imminent. The Fed started sounding a bit hawkish a few weeks ago, but we suspect the central bankers may now realize that they talked about tapering too soon.
THE SUDDENLY JITTERY MARKETS need a dose of confidence, a sign that the economy is nowhere close to a significant slowdown. That shifts the spotlight to the Fed, which is likely to send a signal. If that doesn’t work, fiscal policy stimulus could heat up in a hurry; 2022 is an election year, after all.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
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This post was first published at the AGF Perspectives Blog.
