Weekly Market Commentary

Is that a hawk?

The Federal Reserve Open Market Committee (FOMC) met last week. They get together eight times a year to review current economic and financial conditions, assess risks to price stability and economic growth, and adjust monetary policy accordingly.

It’s transitory. It’s not transitory. It’s transitory. It’s not transitory.

Media analysts were plucking the inflation daisy petals last week. On Thursday, the Bureau of Labor Statistics released the Consumer Price Index Summary, which showed prices were up 5 percent year-to-year.

Pulling the economy out of the shed.

If you’ve ever stored tools or machinery in a shed or garage for an extended period of time, you know they often need some care and repair to function properly. The same appears to be true of the pandemic economy.

Are we at a tipping point?

One side effect of the pandemic was a collapse in demand for oil, which led to “the largest revision to the value of the oil industry’s assets in at least a decade,” reported Collin Eaton and Sarah McFarlane of The Wall Street Journal.

What do markets hate?

They hate uncertainty, and recently there has been plenty of it. Some of the questions plaguing economists and pundits include:

Uncle Inflation is here. Will he overstay his welcome?

Ever since the financial crisis, central banks have pursued expansionary monetary policies to encourage reflation and avoid deflation. Well, it’s taken some time, but inflation is finally here.

It wasn’t just the price of pork chops.

Last week, as investors weighed the news, strong corporate earnings were offset by higher grocery prices and rising numbers of global coronavirus cases.

Solid corporate earnings weighed favorably.

Where are Treasury bonds going

The direction of bond yields is influenced by investors’ expectations for economic growth, among other factors. When economic growth is expected to weaken, bond yields tend to move lower. When economic growth is expected to strengthen, bond yields tend to move higher.

Investors didn’t stumble over inflation last week. Why not?

Zoom, zoom, zoom.

Big economies tend to recover from recessions about as quickly as semi-trucks accelerate from stop lights. In other words, recovery tends to be slow. That may not be the case this time.