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Fed “Taper” is good news for the bond market

Investors are fretting over the prospect of a "Fed Taper," but history shows such will likely be good news for the bond market. Currently, it doesn’t seem…



This article was originally published by Real Investment Advice

Investors are fretting over the prospect of a Fed Taper,” but history shows such will likely be good news for the bond market. Currently, it doesn’t seem that way, with rates rising post-announcement. As noted by CNBC:

“While the Fed has gone into policy retreat before, it has never pulled back from such a dramatically accommodative position. For the past eighteen months, it bought at least $120 billion of bonds each month, Such provided unprecedented support to financial markets that it now will walk back.

The bond purchases have added more than $4 trillion to the Fed’s balance sheet which now stands at $8.5 trillion. Roughly, $7 trillion of which is the assets bought up through the Fed’s quantitative easing programs. The purchases helped keep interest rates low. Such provided support to markets that malfunctioned badly during the pandemic, and fueled a powerful run for the stock market.”

Previously, when the Fed began to taper their bond-buying programs, the market buckled as the “risk-on” trade reversed.

Fed taper balance sheet stock market

As was the case previously, Wall Street analysts quickly assumed that this time would be different despite the previous debacles.

“When Federal Reserve officials talked about pulling back on accommodative policies in 2013, anxious investors sent markets into a tizzy.

The opposite is happening now: The Fed signaled it started discussions of reducing bond-purchase programs. Investors, however, remain placid. The markets, in short, are taking everything in stride.” – WSJ

That is the case for now. Now let’s take a look at how the potential impact of the Fed’s announcement to taper may possibly be good news for the bond market.

Global Liquidity Is Slowing

While Wall Street is eternally optimistic, there are two problems with the view the Fed can cut liquidity without consequence.

To begin with, it isn’t just the Fed cutting liquidity. Liquidity globally, from both Central Banks and Governments, has started reversing heading into 2022.

The hope, of course, is the economy is now strong enough to “stand on its own” without ongoing support. But, as discussed in “Reversion To The Mean,” economic growth is already falling well below expectations.

Over the next few quarters, the year-over-year comparisons will become much more challenging. Q2-2021 will likely mark the peak of the economic recovery.

GDP annual change fed taper

During each previous QE cycle, as soon as the liquidity flows slowed or stopped, undesired outcomes were close by.

Awaken The Bond Bull

The recent “pop” in rates, when the Fed announced they will taper bond purchases, was not surprising. Such is the expectation if one of the primary sources of bond-buying is getting removed.

“In theory, tapering should lead to higher interest rates. By tapering its bond purchases, the Fed is increasing the supply that must get absorbed by the market. Such signals that policy is becoming less accommodative.” – Schwab

However, over the last decade, a reversal in Fed policy has repeatedly provided bond-buying opportunities. In the past, rates rose during QE programs as money rotated out of the “safety of bonds” back into equities (risk-on.).

When those programs ended, rates fell as investors reversed their risk preferences.

Fed Taper QE and Interest Rates

As the Fed begins tapers, investors’ risk preferences will change as liquidity wanes. There are three reasons such will be the case.

  1. All interest rates are relative. With trillions in global debt globally sporting negative interest rates, the assumption that rates in the U.S. are about to spike higher is likely wrong. Higher yields in U.S. debt attracts flows of capital from countries with negative yields which push rates lower in the U.S.
  2. The coming budget deficit balloon. Given the lack of fiscal policy controls, and promises of continued largesse, the budget deficit will swell beyond $4 Trillion in coming years. Such will require more government bond issuance to fund future expenditures.
  3. Central Banks will continue to be a buyer of bonds to maintain market stability, but will become more aggressive buyers during each recession.”

With the current Administration and the Treasury pushing the idea of more government spending, the budget deficit is already rising, with economic growth running well below expectations. Such will foster more, not less, demand for bonds in the future and this is potentially good news for the bond market. 

Bonds May Outperform

Here is the primary point. While market punditry continues to push a narrative that “stocks are the only game in town,” such will likely turn out to be poor advice. But that is the nature of a media-driven analysis with a lack of historical experience or perspective.

From many perspectives, the absolute risk of the heavy equity exposure in portfolios gets outweighed by the potential for further reward. The realization of “risk,” when it occurs, will lead to a rapid unwinding of the markets pushing volatility higher and bond yields lower. Such is why we continue to acquire bonds on rallies in the markets to hedge against a future market dislocation.

Household equity ownership versus stock market and fed taper

In other words, we get paid to hedge risk, lower portfolio volatility, and protect capital. Bonds aren’t dead. In fact, they are likely going to be your best investment in the not too distant future.

In the short term, the market could surely rise further, especially if the Fed continues reinvesting the proceeds from their balance sheet. Such is a point I will not argue as investors are historically prone to chase returns until the very end. But over the intermediate to longer-term time frame, the consequences are entirely negative.

As my mom used to say:

“It’s all fun and games until someone gets their eye put out.”

The post Fed “Taper” is good news for the bond market appeared first on RIA.

Author: Lance Roberts


Mild symptoms

US equity index futures are performing another omicron U-turn this morning, limiting the fallout in Asian markets of another fairly gruesome Wall Street…


US equity index futures are performing another omicron U-turn this morning, limiting the fallout in Asian markets of another fairly gruesome Wall Street session on Friday. The driver of the whip-saw return of serve omicron headline tennis comes from South Africa, where an article from the South African Medical Research Council, suggests that omicron symptoms were milder than previous incarnations, with hospitalised patients mostly having comorbidities. Of course, the sample size is small, but markets never let “the data” these days get in the way of narrative. Omicron variant milder = U-turn = buy everything.

Asia, having suffered so greatly in the delta wave, is understandably more cautious and now is also coming to grips with the reality of the Federal Reserve taper as well as China’s “shared prosperity,” property sector and tech-saga travails. It is no surprise that regional investors have refused to join in North America’s virus ping pong price action unless you are a retail FOMO-gnome inhabitant of Japan’s Nikkei, and South Korea’s Kospi.

US NFP underperforms

Last Friday’s US Non-Farm Payrolls was dismal, adding just 210,000 jobs with a modest upward revision of 82,000 jobs to the October data. The soft data turned into a nil-all draw for markets though as the household employment data suggested 1.1 million jobs had been added, sending the unemployment rate plunging from 4.60% to 4.20%. There are still 10 million open jobs in America and the National Federation of Independent Business survey shows small businesses are crying out for workers. The participation rate remains a dire 61.80%, even as ISM Non-Manufacturing PMI and Business Activity, Employment sub-indexes outperformed.

The truth about employment clearly lies somewhere between the two headline numbers with the household survey likely more prone to exaggeration. Nevertheless, it seems clear that either the workforce has shrunk dramatically through early retirements for example, or Americans are so much wealthier, thanks to the Federal Reserve pimping up asset prices, that they feel no need to immediately return? In this respect, the Fed may have accidentally shot itself in the foot. Such is life in economics, cause, and effect.

Net-net, the overall data impact on Friday didn’t change the narrative surrounding a fast Fed taper and markets have now priced in two rate hikes by late 2022. Apart from allowing markets to fret over omicron into the end of the week, faster tapering and rate hikes impacted tasty valuations of tech stocks, but also lifted the US dollar. The US bond market continues to behave interestingly though, with the curve flattening instead of steepening, as bond markets price in faster, but lower terminal rates from the FOMC, and remaining comfortable that the Fed has medium/long-term inflation under control.

Things are going to get very interesting if that narrative changes and its first challenge could come this Friday if US CPI prints at 7.0%+ YoY. Secondly, if more omicron outlooks hit the street this week suggesting it is more contagious but less aggressive, you can reasonably assume we have seen the lows in USD/JPY and USD/CHF and oil, but I suspect technology will still struggle at the expense of the denizens of the Dow Jones and Russel 2000. ASEAN will probably be the winner as well versus North Asia.

Of course, China issues have not disappeared and despite reassuring words from various state organs regarding China company US listing over the weekend, nerves surrounding China big-tech will continue. The property sector faces another reckoning this week as well after Evergrande announced on Friday it had received a USD 260 million repayment demand, and that it could not guarantee it would be able to meet liabilities going forward. That led to the Guangdong local government “sending in a team” to help manage operations. Evergrande and Kaisa face offshore payment deadlines today and tomorrow as well. There is still plenty of juice in this story into the year-end, with Hong Kong markets probably the more vulnerable. What has likely changed is that the odds of a RRR cut by the PBOC have ramped up.

The data calendar is mostly second-tier this week in Asia except for the Reserve Bank of Australia and India’s latest policy decisions. Directional moves will be dominated by omicron, Evergrande/Kaisa and Friday’s US CPI data, ahead of a central bank policy decision frenzy around the world next week.

Today’s ANZ Job Advertisements, which rose by 7.40% MoM in November, is unlikely to sway the RBA from its ultra-cautious, release the doves, course. The policy statement will be the more interesting, with markets searching for signs of wavering of that course from the RBA. They are likely to be disappointed with omicron community infections in Australia leaving the central bank’s finger glued to the W for Wimp button. The RBI’s policy decision will be more interesting. Rates will remain unchanged, but with stagflation, I mean inflation, moving higher recently, the RBI may signal a rate hike or two are coming. That will be another headwind for local equities, although the rupee may gain some support, assuming the RBI doesn’t provoke a stampede of international fast money out of local equities.

Oil is on the move today as well, with Saudi Arabia raising January prices to Asian and US customers by USD 0.60 a barrel over the weekend, although it cut official selling prices (OSPs) to European customers. Technically, that will make other grades of oil from other producers around the world more appealing to Asian buyers, but Brent crude and WTI are up by 2.0% today anyway. Given that OPEC+ is proceeding with its planned 400,000 bpd increase this month, it appears that Saudi Arabia is taking a punt that omicron is a virus in a teacup. Saudi Arabia’s confidence, along with the South African omicron article over the weekend, is a boost to markets looking for good news in any corner they can find it.

Author: Jeffrey Halley

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Escobar: Russia Is Primed For A Persian Gulf Security ‘Makeover’

Escobar: Russia Is Primed For A Persian Gulf Security ‘Makeover’

Authored by Pepe Escobar via,

It’s impossible to understand…

Escobar: Russia Is Primed For A Persian Gulf Security ‘Makeover’

Authored by Pepe Escobar via,

It’s impossible to understand the resumption of the JCPOA nuclear talks in Vienna without considering the serious inner turbulence of the Biden administration.

Everyone and his neighbor are aware of Tehran’s straightforward expectations: all sanctions – no exceptions – must be removed in a verifiable manner. Only then will the Islamic Republic reverse what it terms ‘remedial measures,’ that is, ramping up its nuclear program to match each new American ‘punishment.’

The reason Washington isn’t tabling a similarly transparent position is because its economic circumstances are, bizarrely, far more convoluted than Iran’s under sanctions. Joe Biden is now facing a hard domestic reality: if his financial team raises interest rates, the stock market will crash and the US will be plunged into deep economic distress.

Panicked Democrats are even considering the possibility of allowing Biden’s own impeachment by a Republican majority in the next Congress over the Hunter Biden scandal.

According to a top, non-partisan US national security source, there are three things the Democrats think they can do to delay the final reckoning:

  • First, sell some of the stock in the Strategic Oil Reserve in coordination with its allies to drive oil prices down and lower inflation.

  • Second, ‘encourage’ Beijing to devalue the yuan, thus making Chinese imports cheaper in the US, “even if that materially increases the US trade deficit. They are offering trading the Trump tariff in exchange.” Assuming this would happen, and that’s a major if, it would in practice have a double effect, lowering prices by 25 percent on Chinese imports in tandem with the currency depreciation.

  • Third, “they plan to make a deal with Iran no matter what, to allow their oil to re-enter the market, driving down the oil price.” This would imply the current negotiations in Vienna reaching a swift conclusion, because “they need a deal quickly. They are desperate.”

There is no evidence whatsoever that the team actually running the Biden administration will be able to pull off points two and three; not when the realities of Cold War 2.0 against China and bipartisan Iranophobia are considered.

Still, the only issue that really worries the Democratic leadership, according to the intel source, is to have the three strategies get them through the mid-term elections. Afterwards, they may be able to raise interest rates and allow themselves time for some stabilization before the 2024 presidential ballot.

So how are US allies reacting to it? Quite intriguing movements are in the cards.

When in doubt, go multilateral

Less than two weeks ago in Riyadh, the Gulf Cooperation Council (GCC), in a joint meeting with France, Germany and the UK, plus Egypt and Jordan, told the US Iran envoy Robert Malley that for all practical purposes, they want the new JCPOA round to succeed.

A joint statement, shared by Europeans and Arabs, noted “a return to mutual compliance with the [nuclear deal] would benefit the entire Middle East, allow for more regional partnerships and economic exchange, with long-lasting implications for growth and the well-being of all people there, including in Iran.”

This is far from implying a better understanding of Iran’s position. It reveals, in fact, the predominant GCC mindset ruled by fear: something must be done to tame Iran, accused of nefarious “recent activities” such as hijacking oil tankers and attacking US soldiers in Iraq.

So this is what the GCC is volunteering to the Americans. Now compare it with what the Russians are proposing to several protagonists across West Asia.

Essentially, Moscow is reviving the Collective Security Concept for the Persian Gulf Region, an idea that has been simmering since the 1990s. Here is what the concept is all about.

So if the US administration’s reasoning is predictably short-term – we need Iranian oil back in the market – the Russian vision points to systemic change.

The Collective Security Concept calls for true multilateralism – not exactly Washington’s cup of tea – and “the adherence of all states to international law, the fundamental provisions of the UN Charter and the resolutions of the UN Security Council.”

All that is in direct contrast with the imperial “rules-based international order.”

It’s too far-fetched to assume that Russian diplomacy per se is about to accomplish a miracle: an entente cordiale between Tehran and Riyadh.

Yet there’s already tangible progress, for instance, between Iran and the UAE. Iranian Deputy Foreign Minister Ali Bagheri held a “cordial meeting” in Dubai with Anwar Gargash, senior adviser to UAE President Khalifa bin Zayed Al Nahyan. According to Bagheri, they “agreed to open a new page in Iran-UAE relations.”

Geopolitically, Russia holds the definitive ace: it maintains good relationships with all actors in the Persian Gulf and beyond, talks to all of them frequently, and is widely respected as a mediator by Iran, Saudi Arabia, Syria, Iraq, Turkey, Lebanon, and other GCC members.

Russia also offers the world’s most competitive and cutting edge military hardware to underpin the security needs of all the parties.

And then there’s the overarching, new geopolitical reality. Russia and Iran are forging a strengthened strategic partnership, not only geopolitical but also geoeconomic, fully aligned to the Russian-conceptualized Greater Eurasian Partnership – and also demonstrated by Moscow’s support for Iran’s recent ascension to the Shanghai Cooperation Organization (SCO), the only West Asian state to be admitted thus far.

Furthermore, three years ago Iran launched its own regional security framework proposal for the region called HOPE (the Hormuz Peace Endeavor) with the intent to convene all eight littoral states of the Persian Gulf (including Iraq) to address and resolve the vital issues of cooperation, security, and freedom of navigation.

The Iranian plan didn’t get far off the ground. While Iran suffers from adversarial relations with some of its intended audience, Russia carries none of that baggage.

The $5.4 trillion game

And that brings us to the essential Pipelineistan angle, which in the Russia–Iran case revolves around the new, multi-trillion dollar Chalous gas field in the Caspian Sea.

A recent sensationalist take painted Chalous as enabling Russia to “secure control over the European energy market.”

That’s hardly the story. Chalous, in fact, will enable Iran  – with Russian input – to become a major gas exporter to Europe, something that Brussels evidently relishes. The head of Iran’s KEPCO, Ali Osouli, expects a “new gas hub to be formed in the north to let the country supply 20 percent of Europe’s gas needs.”

According to Russia’s Transneft, Chalous alone could supply as much as 52 percent of natural gas needs of the whole EU for the next 20 years.

Chalous is quite something: a twin-field site, separated by roughly nine kilometers, the second-largest natural gas block in the Caspian Sea, just behind Alborz. It may hold gas reserves equivalent to one-fourth of the immense South Pars gas field, placing it as the 10th largest gas reserves in the world.

Chalous happens to be a graphic case of Russia-Iran-China (RIC) geoeconomic cooperation. Proverbial western speculative spin rushed to proclaim the 20-year gas deal as a setback for Iran. The final breakdown, not fully confirmed, is 40 percent for Gazprom and Transneft, 28 percent for China’s CNPC and CNOOC, and 25 percent for Iran’s KEPCO.

Moscow sources confirm Gazprom will manage the whole project. Transneft will be in charge of transportation, CNPC is involved in financing and banking facilities, and CNOOC will be in charge of infrastructure and engineering.

The whole Chalous site has been estimated to be worth a staggering  $5.4 trillion.

Iran could not possibly have the funds to tackle such a massive enterprise by itself. What is definitely established is that Gazprom offered KEPCO all the necessary technology in exploration and development of Chalous, coupled with additional financing, in return for a generous deal.

Crucially, Moscow also reiterated its full support for Tehran’s position during the current JCPOA round in Vienna, as well as in other Iran-related issues reaching the UN Security Council.

The fine print on all key Chalous aspects may be revealed in time. It’s a de facto geopolitical/geoeconomic win-win-win for the Russia, Iran, China strategic partnership. And it reaches way beyond the famous “20-year agreement” on petrochemicals and weapons sales clinched by Moscow and Tehran way back in 2001, in a Kremlin ceremony when President Putin hosted then Iranian President Mohammad Khatami.

There’s no two ways about it. If there is one country with the necessary clout, tools, sweeteners and relationships in place to nudge the Persian Gulf into a new security paradigm, it is Russia – with China not far behind.

Tyler Durden
Mon, 12/06/2021 – 02:00

Author: Tyler Durden

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Weekly Market Pulse: Discounting The Future

The economic news recently has been better than expected and in most cases just pretty darn good. That isn’t true on a global basis as Europe continues…

The economic news recently has been better than expected and in most cases just pretty darn good. That isn’t true on a global basis as Europe continues to experience a pretty sluggish recovery from COVID. And China is busy shooting itself in the foot as Xi pursues the re-Maoing of Chinese society, damn the economic costs. But here in the US, the rebound from the Q3 slowdown is in full bloom. Just last week we had pending home sales, ADP employment, both ISM reports, jobless claims, Challenger job cuts, the unemployment rate and factory orders all better than the pundits’ expectations. I didn’t list the official employment report (establishment survey) because the headline was less than expected but there were some obvious seasonal adjustment issues with that report. And there was a lot of very good news in the household report that more than offset any disappointment in the number of jobs part of the report. There are still a lot of reports to go before the end of the quarter but right now the Atlanta GDPNow page is showing 9.2% GDP growth for Q4 based on the quarterly data released to date. The economy certainly looks like it is on solid ground right now.

So, why in the world are bonds rallying like a Bored Ape NFT  Bitcoin  natural gas crude oil  a cruise line stock Chinese tech stock  a vaccine stock? The 10 year Treasury yield fell 10 basis points on Friday after the payroll report. Well, actually that isn’t accurate. Right after the employment report at 8:30 the yield rose and peaked at 9:30 at about 1.47%. But yields fell relentlessly for the rest of the day, closing at about 1.35%. Short term rates have been rising due to anticipation of Fed policy but the long end is in full on conundrum mode. The result is a yield curve (10/2) that has flattened all the way back to where it started the year. The 10 year yield peaked in the spring around 1.75% and except for a brief pop higher from August to October, it has been downhill every since. TIPS yields have been even more pessimistic with the 10 year yield still less than 10 basis points from its all time low.

The fact that the current economic data is quite good while the bond market points to something less positive is actually not that odd. The movements in bond markets today are not – mostly – about the economic data being released today. The incoming data obviously has some impact but really what bond market players are trying to do is look ahead to next year. The time frame of that focus – 6 months, 9 months or 12 months ahead – shifts based on events but it is always some point in the future. And those expectations about the future are shaped by past experience and unexpected events.

So, why is this happening? What is it that bond traders see that has them marking down future growth? If you’ve been reading my commentaries for any length of time you won’t be surprised when I say I don’t know. There are a lot of things that influence bond traders, some of them having nothing to do with what is going on the US economy. European investors may buy US Treasuries because the yield, while miniscule, is higher than they can get at home. But in general, as I’ve said many times, we take bond yields at face value. If bond yields are falling, that means growth expectations are falling. More recently the drop in nominal bond yields has been mostly about falling inflation expectations but the fact that TIPS yields remain near their all-time lows tells you that investors are still on edge about rising prices. But the bottom line is that we can never know what is in the minds of millions of investors making decisions about whether to buy or sell bonds. It is obvious though that if investors are buying 10 year Treasuries at a big negative real yield their expectations about future growth aren’t very good. And that was true even when the 10 year was trading at 1.75%. It’s just gotten worse recently.

The emergence of a new variant of COVID may have had an impact recently but yields were falling well before that became news. I would venture a guess that omicron, by itself, is not the cause of more economic pessimism but it may have caused a reassessment of the time line for COVID. I think a lot of people were thinking that Delta was the final wave and now, suddenly, we’ve got another one. It has certainly caused me to think about whether we’ll be dealing with COVID – and more importantly the political response to it – for a long time to come. We don’t know how the omicron variant is going to play out yet but cases are rising and investors may just be taking pre-emptive action, selling stocks and buying bonds. But that is just a guess.

It could also be that the market is starting to price in a Fed policy error which would certainly be consistent with past experience. The last three Fed Chairpersons haven’t exactly been maestros and the one who originally had that title was also the one who couldn’t figure out why bonds were rallying while he hiked short rates (Greenspan’s “conundrum”). Policy errors are the Fed’s default mode; the surprise would be if they actually got something right. I have to say though that assuming economic harm from the end of QE requires a more positive view of the impact of QE than I can muster. That is unless you assume that ending QE will negatively impact risk assets and that will negatively impact the economy. In our current speculative state, that may be more true than in the past so I won’t discount it completely.

While the recent stock market sell off has been generally blamed on the emergence of the omicron variant the bond market says it is more likely that investors are starting to question the long term growth outlook. With Fed policy now turning more restrictive – that is how most people see the end of QE even if we at Alhambra don’t  – attention may be turning to the fiscal and regulatory side of the growth equation. On that front I see little in the pending legislation that directly addresses our long-standing economic shortcomings. There is also the small matter of the ongoing upheaval in China which seems to have the potential for a large – negative – impact on the global economy. China, in my opinion, is looking more every day like Japan at the end of the 1980s. That isn’t necessarily negative for the rest of the global economy – just as the end of Japan’s boom wasn’t – but it adds an element of uncertainty that didn’t exist until recently.

As for the pullback in stocks, it has actually been going on longer and is deeper than the averages show. Only 41% of the stocks in the S&P 500 are currently trading above their 50 day moving average compared to 92.5% in April and 76% as recently as a couple of weeks ago. Only 60% are above their 200 day moving average, a number that was 97% in the spring. It has been a small number of large company stocks holding up the averages and they’ve started to join the rest since Thanksgiving. I wouldn’t get too negative too quickly though. Many of the sentiment measures I watch are getting to levels where we would normally expect a rally. Even if this is the top of this incredible bull run it won’t happen overnight. It takes time to change behavior and right now everyone has been trained to buy every dip. That won’t change easily but it will change eventually. For now, I am staying cautious with our allocations, holding a larger than normal level of cash.

The bond market is offering a warning about future growth but remember it is just a warning. The bond market, like any market, is not infallible and the economy may not perform as badly as bond traders currently expect. We don’t know what the omicron variant means yet; it could well mark the beginning of the end of the pandemic rather than just another bad chapter. We also don’t know the impact of future Fed policy; could it be that ending QE is actually a positive for the economy? Maybe. We also don’t know how the changes in China will impact the global economy, how other countries may change in response. I am contrarian enough to wonder if Japan might not be the major beneficiary of China’s demise as they move to reassert themselves – militarily and economically – in the region. By the way, if you want to know what is behind the recent moves in China, you should probably read up on Wang Huning. His influence is all over Xi’s moves against their big tech companies and I’d bet there is a lot more to come.

The economic environment is unchanged: Falling growth, rising dollar


As I said above, the current economic data isn’t the problem. It is the future the bond market is worried about.

A light week of data ahead but the JOLTS report will be interesting as always.



The only major asset class in the plus column last week was, of course, bonds. Real estate is also rate sensitive and ended the week basically flat. Small caps have been the big losers in this correction another indication that the correction is about economic growth. Interesting that EM stocks managed to stay green for the week, mostly due to, oddly, Latin America. I’m not sure I have a good reason for that other than that those stocks had been killed already. Value outperformed last week but still lags growth by a small amount.


Utilities managed to eke out a gain last week while most everything else was down. Gold was flat on the week and is up over the last month as growth concerns have emerged. The VIX hit 35 last week which is fairly high based on history.


All markets look to the future, discounting the consensus view of millions of traders and investors. The wisdom of the crowd is always shifting though; the current market is just a moment in time. I’ve said many times over the last year that there is lot we don’t know about the post-COVID economy and that is still true. The view of the bond market carries a lot of weight but it can only reflect the knowledge and best guesses of its participants. As we learn more about the changes that COVID has wrought, today’s consensus may prove too pessimistic. I sure hope so.

Joe Calhoun


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