Inflation Fears Moderate, The Dangers of Untargeted Stimulus, and the Change in Equity Leadership
March 1, 2021 | FIRESIDE CHARTS
Some of last week’s inflation anxiety (and the resultant yield spike) appears to have moderated, though the PCE Price Index—the Fed’s favorite inflation indicator—did tick slightly higher last month. Personal incomes jumped by 10% month-over-month in January, though the gains can be attributed almost exclusively to December stimulus and the boost to unemployment payments. President Biden’s $1.9 trillion stimulus package passed the House this Saturday and has moved to the Senate, but how much of it will end up in savings and/or investment accounts of those who don’t truly need the support? Millions of Americans fell into poverty in 2020, but uttargeted aid could bring several unintended consequences. Equities meanwhile have experienced a change in leadership, both by sector and market-cap, and commodities—including “Dr. Copper”—posted some incredible 1-year returns to close out February. What will the effects be on inflation, yields, and equities as we move off last week’s dramatic moves and inch closer to another stimulus deal?
1. A historical look at the Fed’s favorite inflation indicator. You can see why they are able to stay the current course:
Source: The Chart Store, from 3/1/21
2. Can you spot the government stimulus checks?
Source: The Daily Shot, from 3/1/21
3. The need is clear and Covid has isolated and devastated ~ten million households. Focus on those who need help!
Source: The Daily Shot, from 3/1/21
4. Congress needs to focus the stimulus to ONLY those who desperately need it:
Source: The Daily Shot, from 3/1/21
5. Sorry, but how will the same folks like the stimulus packages when the tax man commeth to pay for it all? The new debt alone is almost $17,000 for every man, woman and child in the U.S.
Source: The Daily Shot, from 3/1/21
6. Unfortunately, much of the stimulus packages are being saved and not stimulating economic activity. The law of unintended consequence is at work. Will more stimulus just fuel further excess in the markets?
Source: The Daily Shot, from 3/1/21
7. Central banks creating $30 trillion certainly seemed necessary to stabilize markets, but now we need to question how much more and where is it needed?
Source: The Daily Shot, from 3/1/21
8. Quite a different leader board for February:
Source: The Daily Shot, from 3/1/21
9. Quite a different leader board for February:
Source: The Chart Store, from 3/1/21
10. Commodity gains have been even more impressive:
Source: The Chart Store, from 3/1/21
11. There is no doubt that bond yields have risen. How will bond investors, including the 60/40 type portfolios, react to their February statements?
Source: The Chart Store, from 3/1/21
12. So far junk bonds are showing little signs of duress or worry:
Source: The Chart Store, from 3/1/21
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.