High Impact Events – July 2021 Week 1 #debt #default #inflation


June was really a great month for bulls. Do read my post here regarding my portfolio update for June 2021.

We are now coming into Week 1 of July 2021. As i have mentioned here,

i foresee July to be a month of volatility due to the expiry of the federal borrowing limit on 30th July.

Whichever high impact events this month may serve as catalysts for the volatility.

  1. Non-Farm Employment Change – Inflationary pressures will again cast its shadows on growth equities should the employment change increase.
  2. Unemployment Rate – Inflationary pressures will again cast its shadows on growth equities should the rate decrease.

This week’s events are just a prelude to what is coming up the rest of the month.

I have already rebalanced my portfolio , have you ?

High Impact Events – June 2021 Week 4

The only high impact events for this coming week would be when Powell is due to testify on the Fed’s emergency lending programs and current policies before the House Select Subcommittee on the Coronavirus Crisis, via satellite;

The testimony usually comes in 2 parts: first he reads a prepared statement (a text version is made available on the Fed’s website at the start), then the committee will hold a question and answer session. Since the questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility;

I do not expect Powell to deviate from the FOMC positions of Week 3. He has become experienced and careful of what he says since he first took up the Fed Chair Role back in Feb 2018.

High Impact Events Update – June 2021 Week 3 #FOMC

As expected , the fed has maintained its dovish stance for tapering of assets and maintain its short term interest rate near 0%. However it has brought forward expected rate hike from 2024 to 2023. The so-called dot plot of individual member expectations (FOMC projections) pointed to two hikes in 2023.

Based on the two rate hikes in 2023, it is expected that the Fed has to start tapering fairly soon to reach that goal as it takes maybe 10 months to a year to taper at a moderate pace. We are only two years away from 2023.

Tapering of asset purchase would mean that the Fed will start slowing its bond purchase program, this would mean that short , mid and long term interest rates will progressively rise to a expected 2% by 2023 barring no change in message from the Fed.

Markets reacted to the Fed news, with stocks falling and government bond yields higher as investors anticipated tighter Fed policy ahead, including the likelihood that the bond purchases will slow as soon as this year.

So what does all the above entail to retail investors like you and me ?

Well, to begin with, stock prices of bubble stocks WILL start to decline progressively towards their intrinsic value base on the projected hiked interest rates. Already it has started. HOWEVER, if your portfolio is owning great companies / growth companies at well supported price points. You have nothing much to fear.

In fact, i would be starting to build a war chest and get ready to buy great companies at a discount when others sell.

I leave you with another famous message from Buffett.

The most high impact event of the month happens this coming week on 17 June 2021. The FOMC Economic Projections is when the individual members of the FOMC (Federal Open Market Committee) gives their projections and the MSM will look for indications of earlier tapering of assets from the projections. The Federal Reserve Chairman (Powell) will also give the FOMC Statement to explain the projections. I am expecting both the projections and the statement to maintain the dovish sentiment consistent with those in May.

Despite a sharp drop from its Q2 2020 peak, the 5.8% Q3 unemployment rate still remains uncomfortably high and well above the Fed’s preferred target. More worryingly, the last two monthly Non-Farm Payrolls (NFP) reports have come in below expectations, averaging just a little over 400k net new jobs per month. While this rate of job growth may be acceptable in more normal times, the US labor market is still millions of jobs below its pre-COVID levels and only growing tepidly despite widespread vaccine distribution and economic “reopening” across the country.

In other words, the to-date lackluster labor market recovery following the COVID recession is the reason the central bank is continuing with its unprecedented stimulus measures.

Again, similarly to the week of CPI announcements , I do not foresee any sudden market movements unless there’s freak miscommunication either from the projections or Powell himself.

High Impact Events – June 2021 Week 3 #FOMC

The most high impact event of the month happens this coming week on 17 June 2021. The FOMC Economic Projections is when the individual members of the FOMC (Federal Open Market Committee) gives their projections and the MSM will look for indications of earlier tapering of assets from the projections. The Federal Reserve Chairman (Powell) will also give the FOMC Statement to explain the projections. I am expecting both the projections and the statement to maintain the dovish sentiment consistent with those in May.

Despite a sharp drop from its Q2 2020 peak, the 5.8% Q3 unemployment rate still remains uncomfortably high and well above the Fed’s preferred target. More worryingly, the last two monthly Non-Farm Payrolls (NFP) reports have come in below expectations, averaging just a little over 400k net new jobs per month. While this rate of job growth may be acceptable in more normal times, the US labor market is still millions of jobs below its pre-COVID levels and only growing tepidly despite widespread vaccine distribution and economic “reopening” across the country.

In other words, the to-date lackluster labor market recovery following the COVID recession is the reason the central bank is continuing with its unprecedented stimulus measures.

Again, similarly to the week of CPI announcements , I do not foresee any sudden market movements unless there’s freak miscommunication either from the projections or Powell himself.

High Impact Events Update – June 2021 Week 2

As expected, the CPI for May 2021 was bound to be higher q over q . What did you expect ? There’s lot of pent up demand and the global supply chain is lagging behind especially so for semiconductors which are needed for a whole host of IT devices needed for WFH arrangements!

If you listened to my earlier post below, you will know NOT to panic and hold back on any selling decisions. I leave you with a famous quote from the great Buffett.

There is only 1 high impact USD event this week on 10 Jun. The CPI announcement should not have any adverse impact on Equities unless there is a freak result which may spook Mr Market. Barring no surprises, this week should be pretty calm

High Impact Events – June 2021 Week 1

June 2021 Week 1 – 6 high impact USD events. need to pay special attention to 4 June. i see 3 red flags here

Fed Chair Powell Speaks –
Anything less than hawkish will definitely cause the topic of increasing interest rates to appear again. Not good for Equities if that happens

Non-Farm Employment Change
Important announcement for Change in the number of employed people during the previous month, excluding the farming industry. the better NFP is, the more positive will be the economy . Again – higher interest rates?

Unemployment Rate
this speaks for itself.

Could there be a sell off before 4 June for TP? I think its highly possible