29 Apr NO SURPRISES FROM THE FED MEETING
The outcome of the Fed meeting was largely as expected. The Committee strengthened their assessment of the economy and signaled that risks have diminished while leaving the key interest rate near zero and maintaining a $120 billion monthly pace of asset purchases. Powell remarked that it was not yet time to discuss scaling back asset purchases. The Committee further stated that inflation has risen but is “largely reflecting transitory factors.”
Equities were unmoved by the announcement but market-based inflation expectations over the decade rose to their highest since at least April 2013.
There were no comments about the deficit or proposed tax hikes.
Speaking of which, the President is proposing ending the popular 1031 real estate exchange for any property gains over $500,000.
It appears every day the Administration is proposing a new tax or the repeal of a popular tenant of the tax code.
Like most I believe the vast majority of these proposals will not become law. I do not think it is an embellishment, however, the Administration is attempting to radically change the economy and society, a view perhaps validated by CNN as it described the President’s agenda as “Moderate Radicalism.”
CNN further commented the President Biden is the inverse of President Reagan, the President who the news outlet credited as the genesis for today’s economic inequality.
Commenting on yesterday’s market activity, equities were mixed on profit reports. Treasuries were relatively unchanged.
Last night the foreign markets were up. London was up 0.59%, Paris up 0.45% and Frankfurt down 0.36%. China was up 0.20%, Japan up 0.21% and Hang Seng up 0.80%.
The Dow should open nominally higher on the Federal Reserve dovish stance and strong earnings from to mega sized tech companies.
There is little reaction to the President’s speech, a speech that promises tax increases on the wealthy to pay for ambitious plans to spend trillions on “infrastructure,” education and other progressive Democratic priorities. Much of what he proposed was already preannounced. As I have commented many times, if the President’s proposed agenda is the elixir for economic success, why has the European social democracies lagged the industrialized world for many years?
The 10-year is down 11/32 to yield 1.65%.