Tell us your plans, Mr. Powell!
What the Market - July 26, 2021
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What the Market?
Propped up by stellar corporate earnings, Mr. Market is keeping a blind eye on any negativity. The week ahead will be inundated by corporate earnings and a slew of economic data that should set the pace and direction for the second half of the year.
What’s driving the market?
The Fed’s time to shine: On Tuesday the Federal Reserve kicks off its two-day meeting that will culminate with a monetary policy decision and press conference Wednesday afternoon. Although no major decisions or changes are expected, analysts await the Fed to address the above-expected growth and inflation. While the Fed may not precisely indicate when the tapering of its massive asset-buying program will begin, Chairman Powell should provide support indicating that it may begin by the end of the year along with the possibility of an interest rate hike in late 2022. The key message should center around a flexible policy approach with a stronger definition to how close we are to “substantial further [economic] progress.”
Global Markets on call: Global equity markets will be expectant to the IMF’s release of its world economic outlook update. Analysts will be looking at which countries got upgraded/downgraded since the last update, particularly factoring in the asymmetric advances in vaccination rates and the potential impact of new lockdowns globally, fueled by the Delta variant.
What’s an investor to do?
Equity markets have been on fire lately posting ATHs and growing at hardly sustainable rates. Even growth sectors have experienced a bounce-back despite not much changing. The US economic recovery seems well underway but international markets seem to be lagging. Pay close attention to the Fed’s press conference on Wednesday and remember that growing restlessness around the world will eventually catch up with America.
There is still time to open and build up positions in long-term strategic or value plays, particularly with the infrastructure bill around the corner. Traditional valuation metrics have been skewed and almost senseless this past year. It is hard to gauge when a correction may be coming but too much growth with little fundamental support sounds like a dangerous thing to time.
For those with exposure to emerging markets, re-evaluate your position’s relative strength and long-term prospects because analysts expect a rougher-than-expected ride ahead in the coming months. Chinese equities in particular have been hit hard this year, and there are a lot of discounted opportunities to build up there. One man's trash…
Keep an eye on the economy
Personal Consumption and PCE Price Index: This week’s PCE Price Index, the Fed’s preferred inflation metric, should provide a deeper understanding of the real impact of rising prices. This will probably be one of the biggest indicators to follow closely as the Fed heads to Jackson Hole in August.
Consumer Defensive: Stanley Black & Decker, Sherwin-Williams, Mondelez, Procter & Gamble, Altria
Consumer Cyclical: Yum Brands, Spirit Airlines, McDonalds, Molson Coors, Keurig Dr. Pepper, Hilton, Six Flags, Jet Blue
Tech: Apple, Twilio, Microsoft, Google, Facebook, Pinterest, Tesla
Others: 3M, General electric, UPS, Pfizer, Boeing, Exxon Mobil, Chevron, Caterpillar, Visa
Monday: Eurozone Finance ministers meeting, Bank of England speech, US new home sales, Dallas Fed Manufacturing Index
Tuesday: Bank of Japan speech, US durable goods orders, Housing Index, Consumer Confidence, Richmond Fed Manufacturing Index
Wednesday: Federal Reserve interest rate decision, monetary policy statement and press conference
Thursday: Eurozone industrial and consumer confidence, US Jobless claims, Q2 GDP data
Friday: Eurozone Q2 GDP data, unemployment rate and CPI, US Personal Income and Consumption Expenditure Price Index, Consumer Sentiment Index and Purchasing Managers Index, Chinese PMI
If you didn’t know, now you know
Tunisia’s president has sacked the prime minister and suspended parliament after violent protests broke out across the country. The people have been angry at the government’s mishandling of Covid-19. As protesters clash with police, violence is intensifying as is the President’s response.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
Atomic Habits by James Clear. A WTM favorite and a one of the most useful guides to build actionable change in behavior. Although much of the content may seem rational, the book is exceptionally good at walking you through how to act upon and leverage the world we live in in your favor. A book to read often.
Measure What Matters by John Doerr. Legendary venture capitalist John Doerr reveals how the goal-setting system of Objectives and Key Results (OKRs) has helped tech giants from Intel to Google achieve explosive growth - and how it can help any organization thrive.
This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.