Equity markets closed highly after last Friday’s close. The Nasdaq set a record close after a broad decline last week.
The main concern for last week decline was souring sentiments on the global economy. Moreover, the rising infection rates do not help, given that the vaccine efficacy on the new variant is in doubt. Hence, the sell-off.
The fear seems to disappear given the vaccine mandate news coupled with a likelihood of longer monetary accommodative measures feeding into the market.
The Week Ahead
Pika World expects economic data to dominate the sentiment cycle increasingly. Although we see much of the services activity poor performance was attributed to supply constraints, we might be seeing a real impact on a general decrease in consumption.
The buy-the-dip movement appears to have worked well this year and seems to be alive as a strategy thus far. This is partly because market participants may believe that Delta’s variant impact on the economy could be temporary. While supply constraints pull back current growth, the expansion in production, hopefully in 2022, which satisfy the backlogs, could help replenish inventories and fuel for the economy.
The Fed is Cancelling In-Person Jackson Hole Retreat
There could be far-reaching implications for the latest Fed’s move. First, the decision reflects the broader reality of a slow down in economic activity as Covid roars back to the public health crisis. The latest data from TSA showed moderating travel as the number of people passing through the TSA checkpoints falling by 10% on Friday, after reaching a high in mid-July.
Next, OpenTable, a restaurant-booker, also see a further decline in reservations. And we have economists from Oxford Economics which has a recovery tracker is stagnant as households become more cautious in their spending
The Wild Card is Playing Out
Since the pandemic begins, Uncle Powell stated that the economy’s path is mainly dependent on how the covid delta variant develops. However, during a press conference last Wednesday, he did acknowledge that the subsequent waves of Covid had a reducing impact on the economy. Still, future mutations of the variants are uncertain.
The move to a virtual symposium will have an impact on the local economy. Nonetheless, the decision also means that the Fed is generally re-assessing the expected economic health, and hawkish members within the committee may now tilt to a more conservative stance.
If that holds, Pika World believes it brings cheers to the market, and the music continues.
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All is well.