JPow'd - So, it turns out that it wasn't just JPow's relentless money printing that has been pumping the markets. Even at the announcement of the highly anticipated tapering plan, stocks couldn't be stopped. Wall Street witnessed nothing short of a masterclass in calming fear of the unknown from the Fed, but we'll see how this plan plays out over the next few months. Now, the deets:
Tapering will begin next month, as expected. The Fed will begin to reduce purchases of treasuries and MBS by $15bn each month until completely stopping in June, 2022. Markets cheered, as this is as broad of an indication as any that the Central Bank is pleased with economic progress since the pandemic.
Rate hikes cause concern for equity markets, as detailed yesterday, but Powell really put his foot down hard on this one. He preached that tapering "does not imply any direct signal regarding our interest rate policy", which was the Street's big fear. No exact date was given, but judging by the infamous dot plot, 2H'22 or 2023 look like top contenders.
Language in the Fed's released statement provides color on how exactly the "gods of the economy" are thinking. If you're like me, you just learned the word "transitory" this year (thanks JPow), but instead of doubling down on their view of the transitory nature of inflation, the FOMC amended their statement to say "expected to be transitory." Kind of a bombshell, but I'm guessing the Street is just happy with no rate hikes yet.
Carbon Collab - It was a beautiful and mildly warm day here in New England yesterday, which is terrible because it could potentially be a sign of the early impacts of drastic climate change. Thankfully, our government overlords have at least semi removed their heads from their asses and decided to do something. That something is carbon tariffs. The U.S. and EU recently penned an agreement in which both sides of the Atlantic agreed to impose higher tariffs on imported goods that generate outsized levels of carbon in their production and transportation. It's certainly not an end all be all, but it's a lot better than hoping nothing too bad happens, and of course, once you get money involved, everyone starts to care.