Friday, August 27, 2021

Morning Note: "A Man Hears What He Wants to Hear and Disregards the Rest" -- And a little music 😎

Traders were sanguine this morning ahead of Fed head Powell's speech due to start at 10am ET. Which is interesting since, without exception, the five Fed members (only one a voting member) who've granted interviews yesterday and today said they're ready to begin cutting monthly bond purchases much sooner than later.

So is "the market" then okay with the notion that the Fed may be diluting the otherwise heavily-spiked punchbowl a wee bit, thus assuming that in reality they've truly no interest in sobering up the partiers anytime soon (if ever)? The latter indeed being reality...

Well, indeed, Powell is speaking as I type, and, yes, he's intimating that tapering's likely coming by year-end, but rate hikes are not remotely on their near-term radar. 

At the moment he's efforting (mightily!) to convince the world that inflation's not going to be a long-term thing after the dust settles... Well, that's not our base view, but it's for sure the one that most-accommodates policymaker aims going forward. 

Based on immediate market reaction (up!), the answer (for the moment), is yes, the market's okay with a mild taper and a promise to do no harm (to stock prices) -- by way of consequential tightening -- under any circumstances.

Now, I should add, the last time Powell (or, let's say, the Fed, via the release of the last meeting's minutes) sung that tune (we'll dilute the punchbowl, but please feel free to drink more), the market held up fine while the notes were being parsed, then tanked in the aftermath... But I must say, he's hammering uber-hard against the structural inflation narrative this morning, so maybe it'll stick this time... 


Asian equities leaned green overnight, with 10 of the 16 markets we track closing up.

Europe's mostly higher this morning, with 14 of the 19 bourses we follow in the green as I type.

U.S. stocks are in rally mode. Dow up 0.58%, SP500 up 0.67%, SP500 Equal Weight up 0.79, Nasdaq 100 up 0.86%, Nasdaq Comp up 084%, Russell 2000 up 1.29%.

The VIX sits at 16.53, down 12.31%.

Oil futures are up 1.51%, gold's up 0.61%, silver's up 0.82%, copper futures are up 1.70% and the ag complex is 0.78%.

The 10-year treasury is up (yield down) and the dollar is down a notable 0.39%.

Led by AMD, oil services stocks, metals miners, uranium miners and KRBN (carbon credits) -- with no positions in the red so far this morning -- our core portfolio is up 0.78% to start the session.


Well, this is what comes to mind as I listen to the Fed Chair cherry pick history and the data in an all out blitz to convince the market that inflation is ultimately no thing this go-round:

"A man hears what he wants to hear and disregards the rest." -- Simon and Garfunkel

 

  


Have a great day!
Marty

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