A year and a half after the U.S. financial markets freaked out over the onset of Covid-19, we’re in a weird period where people employers can’t fill job positions, mask mandates are back in style, and Federal Reserve higher-ups are talking about tapering.
It’s like the Twilight Zone. Employers are using all kinds of incentives, from signing bonuses to offering pet insurance, to fill the void as there are now a million more job openings than people looking for work in the U.S.
Yet somehow, the economy added 943,000 jobs in July, the best pace in nearly a year and nearly 100,000 more than what the economists had predicted.
At the same time, the Senate just approved a $1 trillion bipartisan infrastructure bill which would, undoubtedly, create even more job openings to be filled.
How did the financial markets respond to all of these developments? Treasury yields jumped and the dollar ticked up, while stocks clung to all-time highs and precious metals pulled back.
And there it was in the headlines: “July’s strong jobs report could prepare the Federal Reserve to dial back its bond-buying program.”
Grant Thornton Chief Economist Diane Swonk added her voice to the chorus of experts, saying, “This is a good number that gets the Fed primed and pumped to taper.”
Are you sure about that? Let’s look at the historical data. The Federal Reserve’s website claims that its balance sheet “has expanded and contracted over time,” but I don’t see a whole lot of contracting going on here:
Since the financial crisis of 2008-2009, the Fed’s balance sheet has ballooned from $1 trillion to a whopping $8 trillion.
And notice how the pace of bond buying went vertical after March 2020, when the Covid-19 pandemic reached the U.S. Today, the Delta variant is spreading and instead of normalizing or tapering, the Fed is only likely to ramp up its asset-buying spree.
Believe it or not, the Federal Reserve buys $120 million worth of assets each and every month, including Treasury securities worth $80 billion and mortgage-backed securities worth $40 billion. The idea, supposedly is to lend support to the economy – but it was never supposed to be a permanent solution.
93% Of Investors Generate Annual Returns, Which Barely Beat Inflation.
Wealth Education and Investment Principles Are Hidden From Public Database On Purpose!
Build The Knowledge Base To Set Yourself Up For A Wealthy Retirement and Leverage The Relationships We Are Forming With Proven Small-Cap Management Teams To Hit Grand-Slams!
Yet, that’s exactly what it has become as the stock market has become dependent on the central bank’s financial support. Taking away the punch bowl, at this point, would throw the markets into a “taper tantrum” and no one wants to be blamed for inducing a stock market correction.
Nonetheless, the pundits will continue to believe the narrative they’re fed by the Fed. For instance, Mike Bell, a global market strategist at JP Morgan Asset Management, is apparently buying it hook, line, and sinker.
“Today’s bumper payrolls report highlights a roaring recovery in the labor market and increases the chances of the Fed tapering their asset purchases sooner rather than later,” Bell declared.
The line of thought, presumably, is that the economy is now running so smoothly and powerfully that the Federal Reserve’s financial support is no longer needed.
But again, it was never about what the economy really needed – and the “recovery” is anything but assured. The Federal Reserve chairman himself, Jerome Powell, has acknowledged this.
“There’s no reason they just can’t keep coming… one more powerful than the next. We don’t know that, but that’s certainly a plausible outcome,” Powell recently warned in reference to the new variants of Covid-19.
Besides, the Fed wants to see “substantial further progress” before it slows down its bond-buying spree.
This would include not only full employment (and we’re not there yet), but also 2% inflation.
The annual inflation rate for the United States is currently 5.4%, so we’re not there yet, either – and the way things are going, don’t count on getting there anytime soon.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
Protect Yourself Now, By Building A Fully-Hedged Financial Fortress!
Legal Notice: No matter how good an investment sounds, and no mater who is selling it, make sure you’re dealing with a registered investment professional. Use the free, simple search at investor.gov
We are not brokers, investment or financial advisers, and you should not rely on the information herein as investment advice. We are a marketing company. If you are seeking personal investment advice, please contact a qualified and registered broker, investment adviser or financial adviser. You should not make any investment decisions based on our communications. Our stock profiles are intended to highlight certain companies for YOUR further investigation; they are NOT recommendations. The securities issued by the companies we profile should be considered high risk and, if you do invest, you may lose your entire investment. Please do your own research before investing, including reading the companies’ SEC filings, press releases, and risk disclosures. Information contained in this profile was provided by the company, extracted from SEC filings, company websites, and other publicly available sources. We believe the sources and information are accurate and reliable but we cannot guarantee it.
Please read our full disclaimer at CrushTheStreet.com/disclaimer