GDP Forecast Climbs to 6.5%, 10-year UST Yield Hits 1.7%, and Checking In on Growth vs. Value
March 19, 2021 | FIRESIDE CHARTS
The Fed concluded its meeting on Wednesday with an announcement that it projects GDP surging to 6.5% this year—a major revision from its December estimate of 4.2%. Inflation fears were stoked yet again of course, aided by last year’s policy pivot to average inflation targeting, though Chairman Powell did his best to calm them. The housing boom—at its strongest since the lead up to the financial crisis—isn’t fully appearing in the Fed’s favorite inflation measure though… Nevertheless, the 10-year UST yield climbed to 1.7% and we appear to be witnessing the rapid decline of the ~40-year bond bull market. Over in the equity markets, Big Tech isn’t faring too well itself these days and value is gaining “momentum” in its campaign to overtake growth. As growth pushes back, particularly in the EM space, we’re wondering how the rotation will play out on the global stage.
1. The FED is now predicting 6.5% GDP growth for this year. They also think any inflation pressure is transitory. Has everyone forgotten the ~$30 trillion of central bank printing? Bondholders are going to want to get paid back…
Source: The Daily Shot, from 3/18/21
2. The regional FED surveys are surging. Let’s hope the FED can control interest rates…
Source: The Daily Shot, from 3/19/21
3. Home price increases are now higher than the speculation-driven frenzy that led to the great financial crisis. The current market is due to higher demand and the lack of supply…
Source: The Daily Shot, from 3/18/21
4. Rising housing prices have caused the average mortgage to rise by ~1/3, but equivalent rents have fallen. This major component of CPI uses equivalent rents…
Source: The Daily Shot, from 3/18/21
5. All of our concern and speculations about a bond bear have, unfortunately, come to fruition. Two thoughts: It is only March and equity valuations will only stand so much yield increase before reacting…
Source: BofA Global Research, from 3/18/21
6. The FED held their rate forecast to staying near-zero until 2023. However, 4 of 18 members now say rates will start to rise in 2022 and the markets reacted by lifting the 10-year UST to 1.7%.
Source: The Daily Shot, from 3/18/21
7. Big Tech has been struggling this past month:
Source: Bloomberg, from 3/19/21
8. Is this a short-term or long-term trend? It does confirm what we have been saying: value is becoming the new momentum play:
Source: The Daily Shot, from 3/18/21
9. …Or will growth mount a final surge to an even greater extreme first?
Source: The Daily Shot, from 3/19/21
10. EM equities have also seen growth stocks surge ahead. Will the value play be a global phenomenon?
Source: LPL Research, from 3/19/21
11. Real assets tend to do well in inflationary periods. 86% of commodities have positive year-over-year gains…
Source: The Daily Shot, from 3/18/21
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