Originally Posted by
guitarjosh
You think SPY will be at 225 and we have massive layoffs by Christmas time? The Fed only meets this year in Sept, Nov and December 14. Another problem is that I think Biden is more interested in cooling inflation than a pumped up stock market, which will probably have an impact on Fed rates.
The stock and bond markets crashed until mid June, while commodities did very well until that time when they reversed. What I think happened is that people dumped their stocks and bonds due to inflation and bought up commodities to hedge against inflation and geopolitical problems. By mid June, they thought the stock and bond markets had been beaten up enough to go dumpster diving, so they took their profits in commodities and bought up stocks and bonds. If you look at a chart, the peak in commodities shows up at about the same time as the trough stocks & bonds. It looks like that trend reversal is now starting to reverse, and people are getting back into commodities.
The problem is this leaves the Fed in an awfully tough predicament. If the stock market goes up, people feel confident & rich and start buying more, which pushes up prices. If they buy bonds, that pushes interest rates down which makes it easier to borrow, which pushes up inflation. If they buy commodities, which is what I think will happen, prices shoot up and we have high inflation, necessitating higher interest rates. Even without that, natural gas prices are near the highest levels since 2008 and rents are soaring.
I think what happened is we had so much stimulus dumped into the economy that it grew significantly faster than the labor market could keep pace. Since the start of the year the economy has had to contract due to shortages, but it is still large enough to accommodate more workers.