Q 3 2021 Review – Let the Taper Begin, Interest Rates, Bumpy Season

Let the Taper Begin

In late 2018 the FOMC learned a valuable lesson that they are intent on not repeating.  At their most recent FOMC meeting Jerome Powell, chair, made it very clear that the large monthly asset purchases, $120 billion to be exact, will begin to be tapered.  Powell also made it very clear that the eventual raising of interest rates would not occur until the taper was complete unlike the events of 2018 in which the FOMC tapered and increased short-term interest rates at the same time, much to market participants dismay.

Bottom line if all goes well scheduled monthly asset purchases will be trimmed and eventually reach zero sometime next year.

Interest Rates

The most widely followed interest rate, the 10-year US treasury, after having a startling move earlier this year from under 1% to over 1.7% dropped back down to the low 1.2% during the most recent slowdown due to the variant.

Whether Powell’s comments, or the turning of the variant, interest rates have taken note and moved up smartly to over 1.5% beginning the normalization of higher interest rates which is very good long-term for the financial system

Kyle Bass Predictions

In our Q4 Newsletter we noted some very positive predictions from local financial mogul Kyle Bass, namely oil reaching $100 a barrel before the year end and continued Federal Reserve protection along with a push through to the end of the variant.

Hopefully all of these predictions come true.

The Worst of Times the Best of Times

September and October tend to be the most challenging months for Capital Markets mostly due to large institutions, think Fidelity as an example, closing their books on the year which make for more volatile times. So far, this theme seems to have played true.

The good news is notwithstanding our 2018 example from above, November and December tend to be some of the better months of the calendar.

As we head to the end of the year, we will be watching all of these and many other things very closely and will be communicating live on our blog at street-cents.

Sincerely,

John A. Kvale CFA, CFP

Founder J.K. Financial, Inc.

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