Just a HINT of policy change from the FED...

On Wednesday, we received a note and press conference from the Fed where they commented on higher than expected inflation and how they would react. Bonds, currencies and commodities reacted immediately; stocks sold off today when one of the Fed committee members (Bullard) said, yes, tapering of QE was discussed. The markets are moving as if the Fed is about to embark on a tightening cycle just as stimulus payments roll off.

My own view is that the Fed may be forced to start tightening earlier than market hopes of 2023. If the Fed tapers in 2021 and raises rates in 2022, they will be tightening policy just as stimulus wears off, the economy decelerates and Congress faces the voters.

Remember, this September, several key consumer programs expire: extended unemployment, mortgage deferral, rent deferral, and student loan deferral. This may create a consumer cash crunch just as the Fed gets around to removing QE. It should be "fun" (sarcasm).

Robert Lloyd, CFA®

Chief Investment Officer

Lloyds Intrepid Wealth Management

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