The Fed's inflation delusion

Abraham George Macro View

The Fed seems delusional. It was very irresponsible of them to say that any inflationary pressure will be short term.

Before Trump left office, he signed a $ 900 bio stimulus package on 30 Dec 2020. Since then financial assets and commodity prices have all gone up. Personal income levels and personal savings rate has jumped up as well. Now think what will happen to prices when another package more than double what Trump signed is signed into law.

Prices should run crazy. To top it up, we had another inflation data released yesterday. The prices paid component of the ISM manufacturing report for Feb was one of the strongest reading in almost 20 years. It was the ninth consecutive month of price growth, and came from hotter demand and scarcity of supply. This is a two sided blow if you think inflation can be contained.

Equities

Prices in the major indexes have been mixed and very volatile. The NASDAQ price structure has been the most clearest. Chances are prices will rise to 13.430 to 13,445. Should it top out in that area the next move down could be much stronger.

In the e-mini S&P futures the structure is open to differing interpretations. In the flat structure prices can rise to 3934.50 of Feb 24 before starting a decline again.

Bonds

Bond prices have been all over the place. Prices bounced from 157^23 to 162^19 yesterday. The resistance between 162^22 to 164^15 should be formidable. Once this counter trend rally is exhausted prices should decline to new lows.

Euro

The decline yesterday to 1.2027 must have completed the weakness or there could be one more leg to the downside but not that far from 1.2027. The euro is taking the shape of a triangle. Prices should eventually rise above Jan 6 high.

Gold

Gold rose from a low of 1717 to 1760 but all those gains were given up quickly. The next decline in gold could be very significant. Only thing prices should not trade above 1816.

Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.