September 1, 2021 Commentary

The Dow Jones Industrial Average year to date return, through August 31, 2021 was 15.5%.  The Nasdaq Composite return was 18.4% and the S&P500, 20.4%. The strength in stocks is perhaps supported by FRB Chairman Jerome Powell’s remote comments for the annual Jackson Hole conference where he stated, “The Committee remains steadfast in our oft-expressed commitment to support the economy for as long as is needed to achieve a full recovery.”

Powell is prompting the central bank to begin reducing its monthly bond purchases this year, as he believes, “the “substantial further progress” test has been met for inflation.”  He noted clear progress toward maximum employment but also further spread of the Delta variant saying, “We will be carefully assessing incoming data and the evolving risks. Even after our asset purchases end, our elevated holdings of longer-term securities will continue to support accommodative financial conditions.”

Powell did not express urgency regarding the timing of interest rate liftoff, for which he had articulated a different and substantially more stringent test. He stated that the FRB will, “continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time. We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.”

At this time, the market is holding its course, and so are we.

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