If it isn’t by now readily apparent, there are key questions we will presumably find out possible answers to in H2, 2021. These will determine the path forward for markets overall and can be expected to have significant implications for all. Naturally, they are intertwined: continued progress on the reopening front; possible variants disruption, interruptions and challenges; inflation, whether transitory or possibly more entrenched, the impact this will have on rates, respectively the actions the FED will take in terms of removing the significant support it has lent to the COVID-19 pandemic fighting efforts.
Friday’s better than expected US Payroll data (+850,000 vs (e) of +720,000) and US progress toward normalization has many looking at when to start expecting higher rates, respectively as a likely first step, when bond purchases (first, Mortgage-Backed Securities, then Treasuries) will stop. Naturally, with markets showing resilience despite the Delta variant causing some setbacks in several parts of the world, the possible fear associated with that could be … what if we wind up with “Taper Tantrum 2.0”.
As you remember, the original Taper Tantrum occurred several years ago (OMG: 2013 already), and at the time, caused markets to undergo a fairly unpleasant adjustment period. This time around, no matter, everyone has to expect that at some point “normalization” (whatever that means these days …) will see all the accommodation and stimulus pursued to offset the ravages of COVID-19 on the economy removed – eventually, the FED clearly seems intent on avoiding a painful Taper Tantrum 2.0.
To that end, it looks increasingly reasonable that this year’s Central Bankers’ get-together in Jackson Hole will be the gathering at which FED Chairman Jerome Powell can be expected to outline the FED’s intentions and plans going forward.
So keep an eye on it, and in the meantime, enjoy summer, family, and friends:
The Federal Reserve’s prestigious annual Jackson Hole policy symposium will be held in person this year, albeit in a modified form, according to the Federal Reserve Bank of Kansas City, which hosts the conference.
The yearly retreat of the world’s top central bankers and economists went virtual in 2020 due to the COVIC-19 pandemic but will be back at its usual location in the Grand Teton National Park outside Jackson, Wyoming from Aug. 26-28.
“The event will adhere to all health and safety guidelines that are in place at the time of the program,” the Kansas City Fed said in a statement Thursday. “Closer to the event, we anticipate providing notice of keynote speeches that will be available to the public virtually, in real-time.”
The decision comes amid optimism the U.S. is on track to get life back to a more normal footing thanks to an accelerating vaccination program that has fully inoculated 40% of the population, according to Bloomberg’s vaccine tracker.
Jackson Hole is traditionally scrutinized for hints on upcoming Fed policy changes. It will be again this year, with attention on whether Chair Jerome Powell will make a speech and use the occasion to indicate that the U.S. economy has made “substantial further progress” on employment and inflation as a prelude to scaling back massive bond purchases — assuming he’s not already delivered that signal.
Until then, other than billionaires fighting amongst themselves to be the first to watch our world from space – Sir Branson seemingly intent on beating newly retired Amazon Founder Jeff Bezos in that race, things should, one might hope, in deference to people’s desire to enjoy the summer, slow down some … we’ll see.
I’ll leave the high-level FED talk alone in a minute, after taking due note of Mohamed El Erian’s recent article speaking to the risks the FED is exposing everyone to, as in — WHAT IF they’re wrong about that whole “transitory” inflation stuff?
Specifically, if you missed it, Mohamed had this to say:
“Every day I see evidence of inflation not being transitory, and I have concern that the Fed is falling behind”, further going on to say:
“and history makes you very uncomfortable if you end up in a world in which the Fed has to play catch-up”
“Normally, we end up with a recession because you have to slam on the brakes as opposed to slowly taking your foot off the accelerator, which is what believe is going to happen,”
Read more => Click HERE!
So there you have it … pencil in Jackson Hole for late August and … oh, well, I don’t know, a mid-2022 recession, shall we say? What do you think?
In the meantime, of course, it isn’t too difficult at the moment to experience some inflation on a personal level. For instance, I just had my first haircut in some time on Friday, and, well, inflation there looks like … ouch: 20%! BOOM!
Food, though, is a bigger problem: apparently, the latest in terms of worldwide food inflation is +4.8% … ouch again! Read more = Click HERE!
For it certainly is not with the current bond yields that you’ll cover off that kind of inflation, that’s for sure! And if bond yields only have to rise by a fraction of this kind of rate to begin addressing it, while also providing some modicum of actual interest beyond just inflation compensation … watch out!
So whether the FED aims for a taper void of tantrums or not, it clearly is not a given that they’ll get what they want – we shall see about that!
By the way, while summer generally can be expected to afford people a more leisurely pace of life, and more of a balance than usual, there won’t be any shortage of opportunities for you to keep on top of things as far as the investment landscape, and where everyone’s thinking is at. Have a look at CREDO’s FINEVENTCENTRAL for upcoming industry webinars and conferences:
Beyond this, (ICYMI) in case you missed it:
This, in passing, obviously provides Brompton with the opportunity to update you on the US Prefs market, where the firm has an ETF available, managed by Flaherty Crumrine.
Lots of interesting content in that presentation, so if Prefs, specifically CDN Prefs are your thing … don’t miss the opportunity to review this, because the perspective provided is noteworthy in more ways than one, in my books.
Harvest Portfolios– Back to the billionaires would-be astronauts comment above, apparently … apparently, there is a lot of pent-up demand related to that whole “space” opportunity. As you no doubt are aware, you can access it since earlier this year, in Canada, via a Harvest Portfolio ETF:
Harvest Space Innovation Index ETF: ORBT => click HERE!
and one other billionaire not looking to be left behind either: Mr. Bill Gates, with Astra, a company backed by the Microsoft founder making its debut on NASDAQ: => Click HERE!
Staying closer to Earth, or to what the average traveller can access – of note, UAL’s massive airplane order for both Boeing, as well as Airbus planes, underscoring, one would hope, a brighter future for an industry devastated by COVID-19. Read more: Click HERE!
Horizons ETFs recent launch of a Semiconductor ETF (CHPS), rests in part on the notion that Chips are at the heart of much of today’s industrial products, technology, etc, and as such, underpin much of what we use and what we do. An “essential”, as it were. No doubt everyone has taken note of the fact that COVID-19 disrupted this as well, and that shortages on the semi-conductors front, has cause significant issues in a number of industries, perhaps most notably the automotive sector, where Ford, for instance, recently announced significant plant shutdowns on account of having to suspend production as a result of the shortages.
Where am I going with this? Well, CTA’s (Consumer Technology Association), Brian Comiskey recently joined us for a discussion with FT Portfolios Canada related to Cyber Security, published a piece this past spring entitled: “When the Chips are Down: Industry Outlook and Policy response to the Semiconductor Crisis”. I figured I’d give you the link to it, as it still factors into the overall discussion regarding the sector. Read it HERE!
As for the Cyber Security Webinar => you can access it HERE!
Why do I mention Ninepoint here? Well, because Eric Nuttall, Partner and Senior Portfolio Manager, has been very vocal and much on top of all things Energy, and I think his analysis of where things are at with regards to the Oil market, respectively the ramifications/implications this has for Canadian Energy is compelling. Click HERE for his recent chat with Catherine Murray.
Every now and again, a significant opportunity knocks … this may well be the case here, as the confluence of factors Eric refers to resulted in a set-up where, despite significant and very strong gains since the vaccine news (Nov 9, 2020), more upside and a longer runway still remain to be had. Generalists (Hello?) are apparently still not really on top of this??? Hard to believe, but, hey, if that is the case, well, more money will join that party. And even if they are already there to a degree, this clearly is NOT a “greater fool” type of thesis. Rather, valuations even after the sharp gains enjoyed in the past 6-7 or so months remain attractive. I’ll leave it at that. Thankfully, I clued into this whole setup… a while back 🙂 . Hope you did too, but if not … well, mieux vaut tard que jamais, French for … better late than never. And in passing, thanks to Eric!
Hope you enjoyed Canada Day with family and/or friends, as well as the July 4th weekend, which, of course, spells a quieter week ahead, given that July 5th will see US Markets closed for Independence Day! Happy Independence Day to our Southern neighbours!
(Disclosure: I am/may be/will be, or could be “long” ETFs mentioned here. I may also opt to exit ETFs I previously held/owned, at my discretion. All information and or opinions contained here are just that, and not recommendations, nor to be taken as such. If you work with an Advisor / Financial professional, check in with them prior to investing, as you deem appropriate, necessary. Oh, and as everyone always likes to remind us: past performance is no guarantee or indication of future performance, and … yes … unfortunately, much as ETFs are very resilient in difficult market circumstances, as yet again demonstrated during the COVID-19 crisis … well, their performance reflects what they own, and as such … yup, it is possible to lose money if you sell when you are down, and … sometimes, things do not rebound as much as one might like, or in fact may not. That can happen … just ask investors in Japan, how far from the all-time high of 39,000 some odd on the Nikkei back in 1989 they still are… How is that for a disclaimer :).
Take care out there!