July 29, 2021
Good morning,
Apologies for my unannounced miss yesterday. My usual Wednesday Morning Note got stuck on a brutally delayed red-eye back to NY Tuesday night. And while reports of airline companies unpreparedness this summer abound, my delay was infrastructure – the airport’s baggage handling system went down for all airlines for hours that night. Everyone agrees we need immediate, large scale infrastructure rebuilding. It’s tragic that we probably won’t see any real progress on this front for years. The recent bill is so laden with pork, that to call it a infrastructure bill is a big fat lie. But I digress.
As it turned out, there would not have been much material in yesterday’s note anyway – markets were quiet waiting for the results of this week’s Fed meeting. So, today I get to talk about the event of the week in a more timely fashion – on an off-scheduled Thursday morning. Unfortunately, there isn’t much to say post-event either. There were no major changes to yesterday’s policy statement. The Fed will continue to buy $120 billion of securities until “substantial further progress” has been made toward its goals. The grading system of any Fed Chair’s post-meeting performance is directly related to the extent of the market’s reaction following their press conference. Yesterday’s performance passed with flying colors as the market is essentially unchanged since.
When bond yields surprisingly and precipitously dropped a few weeks ago, the pundits pointed to “technical” conditions of the bond market as the cause. They’re still saying that to include Chair Powell yesterday. I think pundits are afraid to say what they may really believe, that the rates market is focused on the post-rebound economy – 2023 and beyond – and is questioning the growth of an economy that may look a lot like our pre-pandemic economy but with tons of debt laying on top of it.
The equity market has thus far bought the yields-down-on-technicals story. Any questioning of that should show up in the tape – and we remain fully invested until then.
It’s summer and things are slow – no note tomorrow. Hope you have a nice weekend.
Be well,
Mike