Waiting on the Infrastructure Vote
Last Friday, the job report was substantial. However, private jobs lagged, and the numbers did not beat expectations very much. Interestingly, the decreasing unemployment rate began the conversation about the Fed changing its tune on full employment. The CPI was stronger than expected. That will cause more Fed discussion. It is very conceivable that an early announcement of a tapering change could come about in the fall.
Regarding inflation, the temporary inflation premise may be losing its credibility. Therefore, I am somewhat concerned with all of the predictions of a continued market appreciation with all these headwinds. We were not expecting a significant correction but a flat market until we clear the fog.
Yields on the Treasuries are still historically low, and the talking heads on news shows make a big announcement when yields rise to a shocking level of 1.30%. I don’t see the result going past 1.60% this year. Therefore, there is still risk, but it could be a different story when looking out twelve months from now.
I expect the (skinny) infrastructure bill will pass even with the future presidential candidates getting their 2 cents in. We need to focus on the REAL companies that will benefit from the bill and invest in substance not myths.