Markets
(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
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(New York)
According to a poll of leading bond strategists surveyed by Reuters, there is likely to be a correction in bond markets in the next three months. The reason why is that central banks across the world are all looking for the exits from their stimulus programs. The head of strategy at Rabobank commented that “The message from Powell is: We will look through it (inflation). We're not going to jump to conclusions and that creates some calm. But you just need a couple of big surprises (in data) and things are again open to correction”. 59% of those strategists surveyed said they saw a “significant” sell-off in global bond markets coming in the next three months.
FINSUM: This all depends on timing and signaling. If the Fed makes an inadvertently hawkish statement, you could easily see a 2013-style Taper Tantrum. But if the Fed uses careful wording and guidance, the whole transition could be smooth.
Infrastructure investment has changed vastly in the last few years. Not only is the sector at...see the full story here
(Washington)
Janet Yellen shocked the markets recently in an interview where she praised the potential of higher inflation…see the full story on our partner Magnifi’s site