Commentary for week ending 06/19/2021

Well, it looks like the Fed has finally acknowledged that inflation may be a problem.  But what did they do?  Essentially nothing.  No decrease in asset purchases and no increase in the fed funds rate.  All it did was signal that they may do so by next year (according to the “dot plots”).  Curiously, the ten year yield is still at 1.45%.  Some folks think that the market is actually two steps ahead of the fed – that is, they think that the fed will raise rates, slow down the economy and then be forced to lower rates again!  I don’t know that the market is that sophisticated.  I think it is just confused by mixed signals.  Personally, I see the fed raising rates by the end of this year (not the next) – and that the 10 year note will be yielding 2% by year end.


So, what about the funds?  In the Growth fund, notice that Nvidia and Adobe have done well, just as predicted.  I would hold on to all stocks as I have mentioned many times the Growth fund is for long term capital appreciation.


As for Income fund, it has been relatively stable, with all of the stocks still “in the green”.  There are no recommended actions, other than to sit back and collect your dividends.  


That’s all for now.  As I mentioned, please don’t take any actions based on market volatility – panic is not a strategy!  I think my selections will serve you well – stay put!


1 thought on “Commentary for week ending 06/19/2021”

  1. I think the Fed is in a box, politically and economically. Economically the idea of raising the funds rate spooks the market whenever it is mentioned. Not just the debt level but the country has gotten so addicted to cheap money that tightening supply or raising the funds rate will have to serve to pop some of the more ridiculous asset bubbles, with consequences that can’t be “controlled”. And politically, there is no good option here when Congress is handing out money like a drunken sailor.

    If the 10 year goes up 500 more basis points between now and the end of the year as you predict, the impact of the market psyche will have resulted in a correction of some sort. Even though you and I lived through double digit inflation — at those times we would have killed for 2%.

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