THE WEEK IN REVIEW: March 21 – 27
Powell hints at pullback
Federal Reserve Chairman Jerome Powell spooked markets last week with hints about removing Fed support from the economic recovery process. During his comments Thursday, he noted that Congress’ financial help plus vaccine distribution boosted recovery faster than anticipated. Powell also said that the central bank would likely start rolling back its assistance in the near future.
“As we make substantial further progress toward our goals, we’ll gradually roll back the amount of Treasurys and mortgage-backed securities we’ve bought,” Powell told NPR’s “Morning Edition.” “Very gradually over time and with great transparency … we will be pulling back the support that we provided during emergency times.”
I’ve been talking about possible Fed or administration policy mistakes, and in my opinion, comments like these would fit that description. Indeed, stock market futures dipped after the interview. Chairman Powell and other Fed officials have said they’ll maintain the status quo until we reach 2% inflation and unemployment levels drop.
Follow the numbers
Speaking of unemployment claims, we finally got some good news on that front. Initial weekly jobless claims came in at 684,000 last week, dropping nearly 100,000 from the week before. It was the first time claims went below 700,000 since the pandemic began in March 2020. Continuing claims fell to 3.87 million, down 264,000 from the week before. Hopefully we keep seeing lower numbers as vaccine distribution marches on.
Medical experts are keeping a close eye on the race between vaccines and variants. By the end of this week, 10 states will have adopted a “come one, come all” approach to vaccinations, removing restrictions and putting a shot in the arms of anyone over the age of 16. So far, 143 million doses have been given across the country, but even as immunization numbers tick up, so does the number of confirmed cases. Some states are reporting a spike in new cases, and the medical community is blaming it on a one-two punch of variants and relaxed restrictions. Another surge could mean a setback for reopening and recovery, leading to increased volatility in the market as we head into the second quarter.
Suez squeeze
Talk about your parking problems. The cargo ship Ever Given somehow got wedged in the Suez Canal last Tuesday, blocking other vessels from coming in and going out. The Ever Given is a 200,000-ton cargo ship that’s roughly the size of four football fields that was carrying 20,000 shipping containers with $9 billion worth of cargo when it ran aground.
In case you didn’t know, the Suez Canal is one of the world’s most important waterways, linking the Mediterranean Sea to the Red Sea just 75 miles east of Cairo, Egypt, and acting as a direct shipping portal between Europe and Asia. The unintentional blockade has delayed shipping of, well, just about everything. The delay could mean a rise in prices, especially for oil, which was already on the upswing. Crews managed to get the ship afloat Sunday night after six days, but the saga’s not over yet. The canal has now been cleared, allowing passage for other vessels.
Coming this week
  • The trial of Minneapolis police officer Derek Chauvin gets underway today. Chauvin is the officer at the center of the death of George Floyd, which sparked protests last summer. Minneapolis officials aren’t taking any chances, and they’ve turned the courthouse into a virtual fort, with fences, razor wire and National Guard soldiers.
  • Look for continued chatter around rising coronavirus case numbers in areas like Florida, New Jersey and New York. Another surge could lead to a rise in market volatility, which is currently at its lowest levels in a year.
Have a great week!
Tom Siomades
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