Aug 30, 2021
Investors alike are asking: where are the markets heading, and what is the Fed going to do? Today, we have Jim Welsh on the podcast to give us some insights about what is happening and what is to come in the ever-changing market. He provides useful insight on what is going on in regard to the treasury, thoughts on Afghanistan and the repercussions that may follow, and what to expect out of the dollar as currencies around the world shift.
-Where are the markets heading? What is the fed going to do?
-Everyone talking the loudest are not voting members on the fed this year
-The fed is in somewhat of a box; QE purchases were intending to stimulate demand in the housing market, but housing prices and rents are going up
-People who use ‘tightening’ to describe what is about to happen are missing the math behind the process
-Treasury had a balance of $1.6 trillion—since March, it has gone down to $400 million
-Treasury yields have come down
-We are going to see an avalanche of issuance in the fourth quarter—when does congress raise the debt ceiling?
-Lack of effective supply in the treasury market has allowed treasury yields to come down, which is going to switch dramatically in the fourth quarter
-Markets are anticipating higher rates; Welsh believes the trend is going to be higher
-Inflation is going to be anything but transitory; either way, higher consumer prices are in the future
-Companies don’t have to worry about market share because all companies are in the same boat
-It was only a matter of time before the Taliban took over Afghanistan—it was just a question of when
-There are going to be repercussions for many years
-Have we turned the corner from the health issues that have been facing the world? The current wave of infection should likely peak soon and then recede—we should hopefully see cases come down soon
-If rates go up, this will most likely not lead to a stock market crash
-We will still see liquidity flowing in—just slightly less over time
-The dollar will probably benefit and strengthen in the next 12 months
-Gold and the gold stocks are at a make or break point
-Dollar strength comes from being better than other currencies, but in Europe, a crisis will most likely not come to bear
-There is so much liquidity, and people are trying to park it to get a positive rate anywhere they can
-Bank reserves are part of M2 money supply, and the money in the reserves isn’t getting into the economy
-If bank reserves turn into bank loans, then this has positive implications for economic growth and inflation