Morning Roundup

By Mark Masterson on September 9, 2021

Good morning,

Below are the news items moving markets today

————————————————

Executive Summary:

 

Capital markets will get a massive dose of central bank speak today.

It started today with the ECB meeting.  Headlines suggest the ECB has decided to begin a small taper of their massive QE/Bond buying program.

• ECB slows its bond purchases as inflation surges: https://www.cnbc.com/2021/09/09/european-central-bank-announces-a-slowing-of-its-pandemic-bond-buying.html

Yet – ECB head Lagarde says its not a taper, just a recalibration…..

• #ECB Lagarde: We’re Not Tapering, But Recalibrating PEPP – DJ

 

As the day unfolds, the Fed will send out an army of speakers to explain how they have it all under control……Fed Speak Today

 

• Charles Evans Speaks 11:05 AM ET
• Mary Daly Speaks 11:05 AM ET
• Robert Kaplan Speaks 12:00 PM ET
• Michelle Bowman Speaks 1:00 PM ET
• John Williams Speaks 2:00 PM ET
• Kashkari, Rosengren and Kaplan Speak 4:00 PM ET
• Eric Rosengren Speaks 4:25 PM ET

 

This comes on the heels of the disclosure that last year Dallas Fed President made millions trading stocks.  These were not small orders, but million dollar trades – each.  This is an official who was setting policy and giving speeches to move the market higher, and directly talking his personal book/holdings.  While probably not illegal – it certainly speaks to a conflict of interest.

• Dallas Fed President Robert Kaplan made million-dollar stock trades in Tesla, Amazon, and Facebook last year https://markets.businessinsider.com/news/stocks/robert-kaplan-stock-trades-apple-tesla-federal-reserve-president-2021-9

More on the Fedspeak today……

• Atlanta Fed President Bostic (voter) told the WSJ he does not expect a decision on tapering the Fed’s $120B/mo asset-purchase plan to come at the 21-22 Sep FOMC meeting, citing recent weaker economic data.
• Bostic had been advocating an October start (see Reuters), but reiterated a fast taper is preferable to a slow one and expects Fed to commence some time this year.
• Follows remarks Wednesday evening from Dallas Fed President Kaplan (nonvoter) reiterating support for an October taper despite having lowered his 2021 GDP estimate on Covid concerns (Reuters).
• Bostic just the introduction to a very busy day of Fedspeak, with regional Fed presidents Evans, Daly, Kaplan, Kashkari, Rosengren, and Williams (as well as Governor Bowman) all making appearances.
• Despite the noise, market still broadly expecting a taper announcement in the next couple of Fed meetings with purchases to start slowing in Q4 or Q1’22.

 

Here is the latest on the “infrastructure” spending plans…..

Democrats struggle with deep divisions over social infrastructure package:

• Nothing particularly incremental on fiscal stimulus as House Democrats begin process of writing big chunks of their social infrastructure package.
• Press reports (Washington Post, Bloomberg) continue to highlight complications facing additional fiscal stimulus due to the big gap in headline spending preferences between moderates and progressives.
• This was in focus yesterday with the Axios report that Machin may only support up to $1.5T of spending on social infrastructure.
• Pelosi conceded she does not know where the final number will settle while House Majority Whip Clyburn said $3.5T may not be needed to do what Biden wants done and what the country needs done (CNN).
• Biggest issue for market remains tax rates, particularly when considering thoughts that stocks have not priced in the risk of higher corporate taxes.
• White House reportedly looking to put more headlines behind revenue raising measures to appease centrists’ concerns about the deficit.

Policy may be an issue behind the surge in job openings.  In fact, July saw over 10,000,000 job openings……

• Job openings hit another record high in July  https://www.marketwatch.com/story/job-openings-hit-another-record-high-in-july-11631110730?siteid=bullytweet

As the chart below shows – that is 1.26 jobs available per unemployed person in the U.S.

RBA Advisors

———————————————

Articles of Interest:

• • Fed officials downplay weak August payrolls report, argue tapering central bank remains on track to taper tis year (Reuters)
  • Dallas Fed’s Kaplan downgrades 2021 GDP forecast, sticks to taper call (Reuters)
  • Democratic divisions deepen over Powell reappointment (WSJ)
  • As deadlines approach on $3.5T spending package, Democrats yet to resolve differences on health care, taxes and education (Washington Post)
  • White House to announce new steps in coronavirus response involving testing, mandates and school measures (The Hill)

———————————————

Charts of the day:

 

We here a lot about “cash on the sidelines.”

Yet, portfolios today have near the lowest level of cash since 1999/2000.

Notice when cash rises? (black line)  Yep – when markets correct like 2009 and 2000.  Interesting that the peak in cash levels are right at the bottom of the bear market.

 

 

 

 

 

 

 

Quote of the day

Don’t look for mistakes, look for solutions

Henry Ford