Gold (GC=F): +$21.90 (+1.23%) to $1,805.90 per ounce
10-year Treasury (^TNX): -0.5 bps to yield 1.2550%
“According to “bond kind” Jeffrey Gundlach, the Fed’s policies are still the predominant factor behind stocks’ continued march higher, with the central bank’s policies keeping bonds expensive relative to risk assets like equities.
“So simply, bonds are so overvalued versus the inflation rate and versus economic growth and other measures … they all suggest on a fundamental basis, the 10-year Treasury should be at least 100 basis points if not up to 200 basis points higher than it is versus economic and inflation fundamentals,” Gundlach said. “But it’s not there because of the Fed’s policy. As long as the stimulus goes on, the stock market can stay in very overvalued territory.”
In other words, bonds have been propped up by the Feds to encourage investment and activity in the market instead.
Investors are speculating which direction the Fed’s will take after their end of August retreat meeting in Jackson Hole, Wyoming. The possibility is runaway inflation, always a concern and likely to be addressed.
The big news in the Coronavirus world involves the legal designation of 2 key vaccines, adding to market recovery in August 2021.
“The Food and Drug Administration is working on full approval of the two-shot Covid vaccine made by Pfizer and BioNTech as soon as Monday, The New York Times reported, citing sources. The move would make it the first Covid vaccine to go from emergency use authorization to full FDA approval.
Concerning recovery, it is assumed more people will accept taking a fully approved vaccine as compared to the current emergency-use status. Also, private and public sector policies mandating vaccine use should be more accepted now that the vaccines are officially approved.
The service and manufacturing segments of the economy are still being affected by the ongoing health crisis. Yet, spending is robust, reflecting consumer optimism and significant market recovery.
“What’s most promising about the US stock market forecast is the savings of Americans and how they’re beginning to spend. Second-quarter vacation spending was up strong and indications are that 3rd and 4th quarters will be even better. Inflation is rising fast, but consumers don’t seem to care, other than regarding rising gasoline prices and utilities. Of course, back-to-school spending might reach $37 billion.
US wages are rising but not keeping up with inflation which is a positive for companies and investors. Inflation managed well could be a tailwind for investors and higher stock prices, given earnings reports are solid. Labor shortages are an issue for many companies but as workers return, it becomes less so.
Real Estate Market Recovery August 2021
The Real Estate market continues to burn hot, specifically in the Florida market. In the last year, the surprisingly healthy housing market helped wider recovery throughout most of the country.
“ For the second straight month in July, more consumers seem to be eyeing real estate. According to the National Association of Realtors (NAR), home sales rose by 2% to a seasonally adjusted 5.99 million units. This would mark a sizable lead over analyst expectations of a 0.5% decline and 5.83 million units.
7 qualities of the current housing climate in the USA:
Low construction numbers
Low mortgage rates
High bidding wars
High rental rates
Quick sales closure
We will cover the staggering US Real Estate boom next week, focusing on the Florida market, which is of course our area of specialty at BAI Capital. The figures and activity are impressive and we can’t wait to share the vital numbers with you.
Today’s Takeaways: Market Recovery August 2021
The stock market is holding strong and the economy is showing consistent signs of recovery.
Full FDA vaccine approval, positive effects from the last 2 years of stimulus inputs, and a booming real estate market.3 solid markers that stand defiant against the looming Delta Variant threat and ongoing mutations.
All in all, investments in the US look very promising coming into the fall season. Market recovery in August 2021 looks solid.
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