The first day of the joint appearance of Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on Capitol Hill did not surprise anyone, but it presented the current plan of US economic policy. Monetary policy will be weak until there is “maximum employment” and fiscal policy will be aggressive, although Yellen said the White House wants to pay for increased infrastructure investments with higher taxes.
Jurrien Timmer, director of global macro for Fidelity Investments, says fiscal and monetary policy “will remain at its peak at all times.” When this column last heard from Timmer, he said that the 1960s provided a blueprint for what was to come in the stock market. He updated the chart to show that it is still on track.
But another historical analogue is the period 1941-1946. To mobilize against World War II, federal debt tripled, the Fed’s balance sheet increased 10 times, and the Fed capped both short-term and long-term interest rates below inflation. Granted, the current game is not so aggressive – the congressional budget forecast for the national debt in 2030 is only 6% higher than before the COVID-19 pandemic – but it is directionally similar.
“The net result of the abolition of Fed rates in the 1940s was that real rates fell well below zero and remained so for several years as inflation took root. In my opinion, the Fed will accept higher inflation today, as will the Treasury. How else will the country get out of the growing debt burden, ”says Timmer.
The result was a growing and widespread stock market, at least until inflation really took off at the end of the decade. There was also a steeper yield curve, measured by the yield gap of 2 to 10 years.
The next day on Capitol Hill for Powell and Yellen
Powell and Yellen will speak before the Senate Banking Committee on Wednesday. Durable goods orders fell 1.1% in February, according to the Commerce Department, surprising economists who had anticipated a small gain. The day will see flash readings of procurement managers’ indexes and four other Fed officials will speak.
A massive cargo ship is stranded in the Suez Canal, blocking traffic on a key shipping route.
GameStop GME,
The video game retailer reported lower-than-expected earnings and said it would stop providing comparable in-store sales data as it tries to focus on more online deals. GameStop has also named a former director at online retailer Amazon AMZN,
Jenna Owens, who will be the chief operating officer.
Intel INTC microchip manufacturer,
said it would invest $ 20 billion in Arizona to build production capacity, news that weighed on rival Advanced Micro Devices AMD,
Electric vehicle manufacturer Tesla TSLA,
will start accepting payment in bitcoin BTCUSD,
CEO Elon Musk told TWTR on Twitter:
Tesla said it would make the move in a previous filing when it announced $ 1.5 billion in cryptocurrency purchases.
Adobe ADBE software manufacturer,
reported stronger-than-expected first-quarter fiscal gains.
Hall of Fame Resort & Entertainment HOFV,
and Dolphin Entertainment DLPN,
both began to enter the non-fungible token market.
Larger futures
It seems more hopeful after a hard day on Tuesday, when Russell 2000 RUT with small cap,
it fell by 3.6%, its worst performance in a month. ES00 futures,
NQ00,
the yield on the 10-year Treasury TMUBMUSD10Y also increased,
it continued to fall to 1.63%.
CL.1 oil futures,
it grew, but they still didn’t have $ 60 a barrel.
Random readings
Heavy rains have created waterfalls on Australia’s famous Uluru landmark.
Three dolphins toured New York City, swimming in the East River.
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