Rate Hikes Back On The Table?

We have been desperately awaiting good news on COVID-19 for months ever since this latest wave of cases started. It has caused record deaths in December and is looking like it will break that record in January. The good news is the future looks bright on two fronts. Firstly, hospitalizations were only up 1% last week which was the slowest rate of increase since late September.

We are nearing a peak in hospitalizations. The data has fully normalized since the holiday. The spread appears to be slowing. That means the 7 day average of deaths per day could peak in a couple of weeks. February should have fewer deaths than January and not because the month has 3 fewer days.

(Click on image to enlarge)

Source: BNO Newsroom

The second piece of good news is the number of vaccines per day reached a record high on Monday. As you can see from the top chart above, 1.2 million vaccines were given out. If we can get o a run rate of 36 million per month steadily, there will be a rapid decline in deaths in March. Life will get back to normal this spring. 9.27 million doses have gone out. South Dakota is in 1st with 5.45% of its people vaccinated. The start of the vaccination process was clunky, but it looks to be gearing up now. State governors are in charge of the distribution in their states. Hopefully, the lagging states learn from West Virginia and the Dakotas. 

Rates Hikes In 2022?

The prices paid index in the ISM manufacturing report rose 12.2 points to 77.6 which, according to the recent correlation, implies over 4% CPI is coming. We’ve seen an impressive rise in commodities prices and long bond yields. Copper is at the highest price since 2013. The 10-year yield is at 1.145%; it increased 5 days in a row. Traders have been saying the treasury market is oversold for a while now, but we are coming off the lowest yields in history.

Shouldn’t yields be high with commodity prices increasing and another stimulus coming? The $900 billion stimulus hasn’t even worked its way through the system and there are already talks of another one. Furthermore, the global economy is set to be fully reopened by the summer, with America reopening this spring. Once deaths decline in March because those over 75 will have gotten the vaccine, business will be back to normal.

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