July 8, 2021
The U.S. 10-year yield has been unexplainably declining, trading as low as 1.25% this morning. And China and Europe are both posturing toward easier monetary policy.
Is there something they are seeing that's not showing up in the data? Is it related to the virus, and concerns that the variant will ramp up cases again? On that note, Japan has decided not to allow spectators at the Olympics under its declared state of emergency.
We all know that it continues to be an unstable world. That's not news.
But for markets, what matters most is intervention.
We've had plenty of intervention over the past year. And we will have more by central banks and governments, if needed to maintain stability and promote growth.
For stocks, liquidity is king. And there is a tsunami of liquidity from global policymakers. Declines will happen. And the history of the post-financial crisis/QE world tells us the declines can be quick. But the recoveries can also be quick. We've had three 5% declines since the election — and several 3%ish declines. Each has been recovered inside of a month. So, knowing that the Fed remains on red alert, any dip in broad stocks will continue to be bought.