Opening Statement from the November 2021 Dividend Gems
Originally published on November 14, 2021 (pre-market release)
Fed to Reduce its Bond-Buying Program
During the recent Fed meeting (November 3) Fed chairman Powell announced the highly anticipated start of a reduction to its monthly purchases of $120 billion of U.S. Treasury and agency mortgage bonds, beginning with a reduction of $15 billion ($10 billion U.S. Treasuries and $5 billion mortgage-backed securities) in November, followed by an additional $15 billion in December.
Because the taper announcement was expected by most investors, the 10-year U.S. Treasury yield did not soar and the stock market did not selloff unlike the aftermath of the taper announcement in 2013 which caught investors by surprise.
The Fed plans to reduce its monthly purchases in a stepwise manner as needed and expects to end the stimulus by June 2022. Meanwhile, Powell emphasized that the end of tapering would not necessarily mean that interest rates would be raised soon after. The Fed intends to begin raising rates once the labor market is near full employment along with moderately elevated inflation.
It is important to keep in mind that the Fed’s interest rate expectations assume that inflation will subside by mid-2022. Although we generally agree with this estimate, we cannot be certain because high energy prices are adding to the transient nature of inflation and could add to supply chain issues to cause a more lasting inflationary environment.
Inflation Watch
In the Intelligent Investor and other research publications we have been discussing the impact of high energy prices as well as rising minimum wages in many large companies as two factors that could help keep inflation higher than the Fed wants for a longer time. Based on the latest inflation data, we view persistent and/or higher inflation as a higher possibility.
Earnings
With just...
This article continues.
To continue viewing this entry please sign in to your Client or Member account.
Restrictions Against Reproduction: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the copyright owner and the Publisher.
These articles and commentaries cannot be reposted or used in any publications for which there is any revenue generated directly or indirectly. These articles cannot be used to enhance the viewer appeal of any website, including any ad revenue on the website, other than those sites for which specific written permission has been granted. Any such violations are unlawful and violators will be prosecuted in accordance with these laws.
Article 19 of the United Nations' Universal Declaration of Human Rights: Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers.
This publication (written, audio and video) represents the commentary and/or criticisms from Mike Stathis or other individuals affiliated with Mike Stathis or AVA Investment Analytics (referred to hereafter as the “author”). Therefore, the commentary and/or criticisms only serve as an opinion and therefore should not be taken to be factual representations, regardless of what might be stated in these commentaries/criticisms. There is always a possibility that the author has made one or more unintentional errors, misspoke, misinterpreted information, and/or excluded information which might have altered the commentary and/or criticisms. Hence, you are advised to conduct your own independent investigations so that you can form your own conclusions. We encourage the public to contact us if we have made any errors in statements or assumptions. We also encourage the public to contact us if we have left out relevant information which might alter our conclusions. We cannot promise a response, but we will consider all valid information.