An Inflated Money Supply, Climbing Treasury Yields, and a Potential Tailwind for the USD
December 14, 2020 | FIRESIDE CHARTS
Consumer prices climbed last month, but Friday’s report shows CPI and PCE inflation levels remaining tepid and lingering below the Fed’s 2% target. With government debt and the deficit at record highs—and Congress under pressure to come to terms on another stimulus package—could the unprecedented climb in the money supply make the situation more complicated in 2021? These factors have already put significant downward pressure on the dollar, which has tumbled over 10% since the onset of the pandemic. But could the greenback soon gain a tailwind from rising treasury yields and the resultant international rate differential? And could gold be poised to climb higher after sinking on vaccine optimism?
1. Actual inflation is still running behind the Fed’s 2% goal…
Source: The Daily Shot, from 12/14/20
2. The U.S. Government’s debt levels should not be dismissed or trifled with…
Source: The Chart Store, from 12/14/20
3. Has the DC trend to spend has gotten out of hand?
Source: The Chart Store, from 12/14/20
4. Whether you follow Keynesian or monetary theories, the levels of money supply injected would make both sides stop in awe…
Source: The Chart Store, from 12/14/20
5. Small, mid and large caps indices all reached new highs last week even though all eleven sectors of the S&P 500 did not…
Source: The Chart Store, from 12/14/20
6. The UST’s ten-year yield has quietly almost doubled. The rate differential of 1%+ with Europe and Japan may start putting a bid under the USD….
Source: The Chart Store, from 12/14/20
7. The USD is still struggling due to our debt, the recent Covid-induced increases in our debt, and the worries over future inflation…
Source: The Chart Store, from 12/14/20
8. Yet gold has been bucking the trend and the sinking dollar tailwind. Gold may be over-sold and poised to make a sprint higher…
Source: The Chart Store, from 12/14/20
9. European inflation is flat to negative…
Source: The Daily Shot, from 12/14/20
10. The amount of global, negative-yielding bonds set a new record…
Source: Bloomberg, from 12/14/20
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.