E Tuesday Talk: Plenty Of Action To Go Around

There is plenty of action to go around and the Fed's August junket to Jackson Hole is a good two months away. Yesterday the markets moved in opposite directions with the Dow down and the Nasdaq up. The S&P 500 closed at 4,226, down 3.4 points, the Dow closed at 34,630, down 126 points and the Nasdaq Comp closed at 13,882, up 67 points. Currently, futures are wading in the shallow end with the S&P treading water at 4,235, the Dow at 34,635 and the Nasdaq 100 a little deeper at 13,880 up 75 points.

Jackson Hole Store Fronts, Wyoming

Pixabay

TalkMarkets contributor Ironman checks on the continuing upward spiral in home prices in his article Relative Affordability Of U.S. New Homes Continues Rapid Decline.

"Median new home sale prices continued rising faster than median household income in April 2021. We can see that trend in the latest update to our chart tracking the ratio of the trailing twelve-month averages of median new home sale prices to median household income. Through April 2021's preliminary estimates, we find the typical new home sold in the U.S. now costs 5.24 times the typical household income."

Here's the chart:

Stefan Gleason who is a metals investment professional is not surprisingly watching inflation signals like a hawk stalking  its prey. A few of his recent observations can be found in his article ‘Taper’ Talk Is Back: Will A Tantrum Follow?.

Among Gleason's jottings worth noting are these:

"Former New York Fed President William Dudley said the central bank will begin the process of tapering – winding down its monthly asset purchases – by year-end"...and (though agreeing with Fed sentiment that current inflation is transitory) "Dudley acknowledged the likelihood of inflation persisting above 2% longer-term."

"The latest Consumer Price Index report due out on Thursday could be a doozy. The CPI is likely to come in even hotter than last month’s 4.2% annual increase. The Fed may be forced by inflation realities to start tapering sooner than it (and Wall Street) would like."

"Investors who considering tapering their precious metals holdings ahead of potential Fed tightening may wish to reconsider. Although Fed-driven volatility in metals and other markets is possible, officials are in no position to take significant action on interest rates that would make U.S. fiat dollars a compelling alternative to sound money."

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William K. 1 week ago Member's comment

There is a caution required for understanding the carefully selected weael words from the federal reserve. "Transitory" means "not permanent", it does NOT mean short. Life is transitory as well, mostly not short, in addition. So that transitory inflation might be around for 50 years, and still be transitory. Thus we must be very cautious about exact meanings when weasels talk, and not presume that the meaning is clear.