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All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

Summary:
As noted above, we will trigger the next short-term “buy signal,” likely next week. As we have discussed regularly, given the daily “sell signal” was offset by a weekly “buy signal,” there was little downside risk. Such turned out to be the case. We can now start adding some additional exposure to areas that we need, but with equity holdings at near target weights, only minor adjustments need to get done. We still carry a very short-duration bond portfolio currently as interest rates continue to push towards our target of 1.8-1.9%. At that level, we will start accumulating long-duration bonds and increasing portfolio hedges. Another reason we don’t expect a lot of upside to markets because the recent “consolidation” failed to work off any of the overbought conditions. Notably, the market

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As noted above, we will trigger the next short-term “buy signal,” likely next week. As we have discussed regularly, given the daily “sell signal” was offset by a weekly “buy signal,” there was little downside risk. Such turned out to be the case.

We can now start adding some additional exposure to areas that we need, but with equity holdings at near target weights, only minor adjustments need to get done. We still carry a very short-duration bond portfolio currently as interest rates continue to push towards our target of 1.8-1.9%. At that level, we will start accumulating long-duration bonds and increasing portfolio hedges.

Another reason we don’t expect a lot of upside to markets because the recent “consolidation” failed to work off any of the overbought conditions. Notably, the market remains more than 5% above its 50-dma, which is historically extreme. Such gets corrected, usually through a price decline or a consolidation. 

All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

Over the last two weeks, we had suggested cleaning up portfolios and rebalancing risk. With that complete, portfolios should be in an excellent position to participate in whatever rally we get over the next couple of weeks. 

As we head into summer, we will likely see our weekly and daily signals align with “sell signals” in late May or early June. Such will likely coincide with a realization of peak earnings and economic growth. While we don’t expect a significant reversion at this juncture, given the ongoing liquidity support, a 7-10% correction is possible and well within annual norms. 

Could it be more? Absolutely. 

But that is something we will navigate once we get there. 


The MacroView

All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

If you need help or have questions, we are always glad to help. Just email me.

See You Next Week

By Lance Roberts, CIO


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All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21 All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

If you need help after reading the alert, do not hesitate to contact me.

All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21


Model performance is a two-asset model of stocks and bonds relative to the weighting changes made each week in the newsletter. Such is strictly for informational and educational purposes only, and one should not rely on it for any reason. Past performance is not a guarantee of future results. Use at your own risk and peril.  

All Inflation Is Transitory. The Fed Will Be Late Again. 04-30-21

Have a great week!

Lance Roberts
Lance Roberts has sharpened that lens with 30 years in the investing world from private banking and investment management to private and venture capital. Lance Roberts’ perspective and common sense analysis is sought after by media outlets such as Fox 26 News in Houston, CNBC, CNN and Fox Business News along with numerous publications including the Wall Street Journal, USA Today, Reuters and the Washington Post. Roberts is the Editor of the X-Factor report and publishes the blog Daily X-change.

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