Jackson Hole and other market news -3

11:53 27-Aug-21

Pundits are acknowledging tapering by year-end, but not at the next meeting on September 22nd.  Personal income and spending figures this morning argue mildly against such a view, but the repeal of eviction moratoriums may mean a delay to the November 3rd meeting.  I personally doubt it will represent a major overall drag.  We'll see soon enough; the spike in indexes is already leveling off, and USD is strengthening across the board, leading me to expect a reversal in equities.  The Fed will follow others sooner or later, and individual investors should be supremely concerned about losing this game of musical chairs.

The equity spike is nothing compared to the 11% spike in American natural gas to $4.35 over the past day and a half.  Some of the factors are transitory, but others are less so.  NFE and GLNG are each up more 3%, but XEBEF hasn't moved much, probably due to the American restrictions I've cited.  I still see each as long term opportunities.  Tesla has filed to sell energy in Texas, possibly signalling an end to my concerns for Clearway there.  However, I still see PPL as probably having better overall long-term return.  We should start to get clarity on that in about six months, and shareholders on September 9th will get what might be their penultimate payment at the current rate.

Finally, I'm also being validated on Sino-American relations as China moves to ban overseas IPOs for some of its tech firms.  I continue to think China and America need each other for at least the medium term, and thus that we'll see some cessation of hostilities foreshadowed by the Huawei CFO case in the next month or two, but it's a close call.

Powell's speech is out and the market is interpreting it in line with my latest shift toward vague terms.  That's true, as he acknowledged inflation in durable goods and cited labor conditions as improving but uneven.  However, he also noted that the pace of recovery exceeded expectations, including jobs.  Here are what I see as the important parts of what he hasn't spoken yet:

My view is that the "substantial further progress" test has been met for inflation. There has also been clear progress toward maximum employment.

and

The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test.

Thus, I think the spike in indexes is misguided and that this is still a setup for tapering by year-end, with the 20% drop that I've expected.  More to follow...