May 6, 2021
The Fed has continued to reiterate low rate accommodations for the next year or substantially
better economic data. However, the pace of their intervention in the bond market could slow
long before rates could come up, and the $120 billion in monthly bond purchases could come to
an end, which is why tech shares have been down for four straight sessions (among other
reasons). The first timeline for the taper is June. With strong employment data continuing, it
would still take great economic data will be needed for the Fed to let off the gas then. Others are
saying the Fed’s annual Jackson Hole meeting in August will make more traditional sense, and
give a better opportunity for a detailed plan. Finally, a slower-paced recovery could have Powell
pushing back the taper until November or even 2022. These timeline scenarios will certainly
affect treasury yields and stock prices differently.
FINSUM + Magnifi: Any read into how the markets will react at these dates would be faulty, right now markets need more economic data so they could tell if this tightening is preemptive or necessary, but the tapering announcement will be critical to setting the pace of interest rate hikes. Tech stocks are caught in the back and forth.
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