Markets
(New York)
According to a poll of leading bond strategists surveyed by Reuters, there is likely to be a correction in…see the full story on our partner Magnifi’s site.
(New York)
When you think of all the risks and all the opportunities for the muni market right now, you might be missing one of the very biggest. While a lot of talk has focused on how Biden and the Democrats—and their respective tax packages—could help muni finances, the reality is the drought out West is a big risk to the muni market. 75% of the West is in an extreme drought right now, representing almost 60m Americans. If that continues it could significantly impact muni finances.
FINSUM: Only 26% of the muni market lies in the drought area, which mitigates systemic risk, but very issuers could be badly hit. Be careful of large muni holdings in drought-stricken areas.
(Beijing)
For the average investor the biggest risk exposure is how…see the full story on our partner Magnifi’s site
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(New York)
Everyone jumped off the three-month gold rally last week after regional Fed President Jim Bullard spoke of tightening in response to the recent CPI releases. This erased over a month of gains in a week as the price sank from $1900 to nearly below $1780. However, the Hulbert Gold Newsletter Sentiment Index which tracks the average recommended gold exposure among a subset of short-term gold timers is at -9.7%. This contrarian take is that gold rallies when this index sinks. The typical threshold for this index is -14.8%, but the dramatic move could be enough to start to buy. This index is one of the key items to watch as the price of gold falls so that you don’t miss the rebound.
FINSUM: Additionally Powell made it very clear that inflation is transitory and Bullard is in the minority on the FOMC. The Fed won’t pull back the reins until inflation is above its long-term goal and persistent.
(New York)
Another jobs report hit the tape today, and another good reading, with job growth outpacing expectations. Crucially, there were also no signs of heavy wage growth that could stoke the market’s inflation fears. According, Treasury yields fell across the board, with the short end of the curve falling the most. Analysts feel that the report did not bring the dreaded Fed Taper any closer, which led to the fall in yields. Fed minutes will be released next week and that is the next time the market will get a peek into what the central bank may do next.
FINSUM: Two divergent paths here—either the market is falling into complacency, or the Fed’s view that inflation is “transitory” is starting to come true. It might only take an errant sentence form the Fed to spark a big correction.
(Tokyo)
The Fed is once again shaking the financial world as tapering signals are trickling in…see the full story on our partner Magnifi’s site