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Decode the signals on inflation amid record market highs, strong consumer demand and a falling Fed.

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This commentary was posted recently by fund managers, research firms and market newsletter writers and was edited by Barron’s.

Comments on the morning technical meeting
Piper sandler
November 4: Stocks showed little fear of the Fed’s cutback announcement yesterday and continued their record winning streak.

The path of least resistance remains higher for US equities. Profit growth and the ongoing economic recovery continue to dominate fears about inflation and potential monetary policy changes. Supply constraints were offset by robust demand and sustainably high profit margins. Rates also remain historically low, and we think some of the recent flattening of yield curve spreads is likely overdone.

The technical context remains bullish as the market enters a period of strong seasonality. Records continue to be set in major US averages, including recent RUT breakouts [


Russell 2000

] and TRAN [


Nasdaq Transportation Index

]. We reiterate our objective of end-of-year courses on the SPX [


S&P 500

] from 4,625.

The heat is on

The weekly speculator

Marketfield Asset Management
November 4: All signs are showing that the US economy is in danger of significantly overheating, and it was interesting to hear comments from Fed Chairman Powell on Wednesday, pointing out how strong the demand for goods and services is in the United States and the United States. how tight the supply lines are.

This is a very different message from that given towards the end of the summer, when the threat of the Delta variant prevented the Federal Open Market Committee from admitting how strong the rebound in demand had been. Of course, this message was absorbed by the equity market, which has had a very good earnings season, with most companies able to handle the logistical constraints and pass the cost increases on to customers.

Wednesday’s FOMC announcement was absorbed without complaint, and at the close, all three major indices hit all-time highs. This is particularly important for the [Russell 2000], which ultimately completed an eight-month consolidation of its powerful late 2020 / early 2021 gains. Significant participation by global benchmarks so far is missing, most of which remain in consolidation or correction patterns, reflecting a strong investor preference for US equities.

Are you underwater?

Out of the box
B. Riley Securities
November 4: “Transient” is an interesting word. The Fed can define it as they see fit, but I see inflation in transit throughout the economy, with some segments particularly affected. The press talks about what it does to households and supply chains. It’s also important to consider what this does to investors.

Basically, whether it’s appreciation or performance, if you’re earning less than 5.4%, you’re underwater. For a person, it means a declining lifestyle. For a business, this means lower profits. With bond yields of all kinds, where they are now, only appreciation works, unless you’ve pivoted and invested in closed-end funds and some exchange-traded funds. Most bond yields no longer offset rising inflation. [Some recent yields on Bloomberg U.S. indexes:] Treasury 1.15%, MBS 1.89%, IG Corporate 2.24%, High Yield 4.25%.

This is one of the reasons our stock markets are on the rise. Bond yields don’t work, so money is pouring into the stock markets, in the hope that the difference can be made up. This strategy is much riskier than buying fixed income securities, but it is one way to fight inflationary pressures. Just hang on to your hats if we have a real fix. Many will blow in the wind.

Don’t give up the gold

In front of the herd
Richard (Rick) Mills
October 30: Gold prices recently rebounded above the key level of $ 1,800 an ounce, the highest in more than a month, as momentum of fear continues to build on inflation more worrying than what central bankers have tried to describe.

We believe the inflation we are experiencing is more than “transient,” as the Federal Reserve has called it on several occasions. With that in mind, we believe in keeping gold (and silver) as insurance against runaway inflation, given the bullion’s traditional role as a safe haven and its historic performance in times of high national debt.

With the way gold has behaved this year, one might not think that it could still be in bullish territory. But in recent weeks we’ve seen how the prices of raw materials, from aluminum to natural gas, have soared to their highest levels in decades (in some cases, records), as chains of supply continue to be shaken by the aftershocks of the covid pandemic. And while gold has remained largely stagnant during this period, there are warning signs of rising inflationary pressures around the world, which would result in more investors turning their backs on towards buying gold as protection.

As of yet, that awareness hasn’t fully taken hold, but once it does, the lure of gold could push prices much higher, perhaps even beyond. his record for August 2020.

In a recent Bloomberg interview, David Garofalo and Rob McEwen, two of the biggest names in Canada’s mining industry, predicted that investors will soon understand that global inflationary pressures are much more intense than suggested, which could send the gold at $ 3,000 / ounce from the current level of $ 1,800.

While it’s not particularly surprising that Garofalo and McEwen are upbeat, predicting such a gigantic leap in a short period of time requires a lot of confidence.

“If other metals are any indication, the gold rally, when it comes, will be dramatic,” Garofalo said in the interview, alongside McEwen. “I’m talking about months,” he said. “The reaction tends to be immediate and violent when it occurs. That’s why I’m pretty confident that gold will hit $ 3,000 / ounce in months, not years. However, its price target would represent a “down payment” to the long-term outlook of $ 5,000 given by McEwen.

Of James Bond and bonds

Market view
National bank of Canada
November 3: As the latest installment in the venerable James Bond film franchise would have us believe, there is “no time to die”. But there are no secret agents lurking in the corridors of central banks. For bond markets, therefore, it is increasingly “time to die” when it comes to extraordinary monetary policy accommodations. We have heard so many [central banks in New Zealand, Australia, the U.K., and Canada]… And now the Fed, where a phase of quantitative easing has just started.

The initial $ 15 billion reduction in the Fed’s monthly purchases of treasury bills and mortgage-backed securities met our expectations for today, as it did on the streets. But upside inflation risks could argue for a more aggressive gradual pace in the not-so-distant future (January?), Allowing the quantitative easing program to die perhaps faster than the wired eight months. earlier. At the margin, another publication today – the quarterly Treasury repayment – could also tip in this direction. Yes, we understand that QE is meant to be independent of government funding requirements. But you would be naive to think that the two are absolutely unrelated.

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