Market Briefing For Thursday, Dec. 16

Fear and hysteria might have a direct tie to the retarded firm monetary-policy, as that might have tempered the Congress months ago (post-emergency that was needed earlier-on in the pandemic). So the Fed got caught in a vise that's revealed the perils of 'wanting' inflation, and believing it would be 'transitory'.

Pixabay

So we have outrageously inflated prices, not just in products but in housing. It might induce some selling in properties and help temper home prices, but as yields go higher housing should gradually come down (not implode during the complex mortgage derivative structure I warned of back in 2007 before totally collapsing everything), demand will change 'provided' bottlenecks ease, etc.

However the Fed will have been shown to have prolonged inflation's agony by virtue of not moving to corral pricing sooner. I warned they were wrong, that it would be 'enduring not transitory' (you can't claw-back wages), and also that I thought the Fed (and Congress) were aiming to pay-back increased US Debt, with depreciated 'Greenbacks', not worried about our citizens' buying power.

For now though, much of that is forestalled with a tremendous 'relief surge'.

We may well hit the peak of inflation near-term, and that would help markets absorb what is 'to an extent' priced-into the market by virtue of declines we've had in the tech and mega-cap 'Grand Dames'. However that doesn't change a view that 'value' smaller-caps are going to be relatively better bets in 2022.

Now, 'fear & hysteria' also prevail with regard to COVID-19. A cynic might be tempted to suggest that 'Government' (or some of them anyway) really aren't enthusiastic (well they haven't been as I've warned since the start with excess focus on vaccines.. which matter.. but insufficient funding for 'treatments' that would basically end the chaos and allow people to comfortably resume 'life'.

People are sick of the draconian restrictions (whether justified or not), and like the movie 'Network', are screaming they won't take it anymore. That's clearly not necessarily the wisest as risk of exposure is increased by non-compliance of course, but that's not the point. The point is our 'hybrid' economy doing lots better 'even with' COVID, than we did months ago at it's 'actual' height.

In-sum: 

We know the Fed's path, and it's a catch-up from behind as foretold. I'll not do bullet-points to summarize the Fed actions, as every media did that. I will explore a bit about the implications, which are not entirely negative. The comment that 'labor force participation' will take longer to recover due to what we've dealt with (pandemic), was likely his way of tempering their zeal without saying it means they have to deal with 'stagflation'.

Also fear and hysteria with COVID-19 mostly goes away with proper treatment availability. I'm not saying government(s) want to suppress people, but simple effective pills, superior low-dose monoclonal antibodies, or even rapid tests that are affordable and sensitive, contribute to relaxing the public stress over it all. Fear & hysteria are less possible 'even if' someone wanted to promote a crisis (and in the United States we do not assume anyone would withhold a rapid test or treatment approval for such reasons)), but there is a prospect that such animated emotions will vanish with truly-effective treatments.

If we do get such a favorable test and treatment progressive trend, the market will have tremendous relief and the 'Roaring '20's' resume in-earnest. In the meantime we have to take care that the next few days aren't like late 2018, but if anything this day gave an excellent entry opportunity for speculators.