- The biggest beneficiary of the Covid-19 Delta variant fear is bond yields, since the 10-year Treasury bond decisively “cracked” the 1.2% level last week and actually hit a low of 1.133% on Tuesday. This means that either inflation fears are ebbing or there is a flight to quality.
- The ECB boosted its bond buying and raised its inflation target to 2%. Interestingly, at the ECB press conference, ECB President Christine Lagarde stressed that its key interest rate of -0.5% will not rise until inflation hits 2%.
- Since positive second-quarter earnings seem to be working and helping to shore up stock prices, the biggest risk that I foresee is merely market mechanics; specifically, ETF spreads. If we get into any extended, multi-day sell-offs, ETF spreads all too often spin out of control.
- The Fed now has more “excuses” to remain accommodative due to the uneven progress in the labor market, so next week’s FOMC statement will be closely scrutinized for any significant policy change.
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Freedom Day?