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SIA Wealth Morning Minutes: Fed Tapering, Earnings and Inflation in Focus

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Building on overnight gains of 1.4% for Tokyo, 0.9% for Frankfurt and 0.6% for London, US index futures are on the rise this morning, with gains of 0.7% to 0.9%. It remains to be seen, however if US indices will be able to hold on to these gains today or if they could follow a recurring pattern lately of morning gains being reduced, erased, or even reversed by the close.

Investors have a lot of news to reflect on this morning. Yesterday’s FOMC minutes indicated that members discussed the potential for tapering to start in November or December with an eye toward wrapping up asset purchases by July of 2022, confirming previous hints from Fed Chair Powell and others. The minutes also indicated that the Fed is well aware that increasing inflation pressures have already prompted several other central banks to reduce stimulus in recent months. The next Fed meeting is being held on November 2-3, followed by Dec 14-15 (which could land in the middle of a budget or debt ceiling showdown).

Speaking of inflation, overnight, China released mixed inflation numbers with producer prices rising more than expected (10.7% vs street 10.5%) and consumer prices rising less than expected (0.7% vs street 0.9%). US producer prices (8.6% vs street 8.7% and previous 8.3%) confirmed increasing inflation pressures stateside adding to recent higher than expected wage and consumer price reports. In other news, US weekly initial jobless claims were better than expected (293K vs street 319K).

Earnings season continues this morning with results out from Morgan Stanley ($1.98 vs $1.68) who beat the street on the back of strong results from investment banking, equity trading, and wealth management. Bank of America ($0.85 vs street $0.71) attributed beating expectations on the economy improving and banking normalizing, and growth in wealth management. Citigroup also posted better than expected earnings ($2.15 vs street $1.65) boosted by investment banking and equity trading results.

Drugstore chain Walgreens Boots also exceeded expectations ($1.17 vs street $1.02), with management indicating that increased visits from people coming in for COVID vaccine shots helped to boost sales in other parts of their stores. UnitedHealth ($4.52 vs street $4.41) beat the street and raised guidance.

Investors have responded favorably to these results so far with the five reporting companies posting gains of 1.5% to 3.0% in premarket action. Alcoa reports after the close today, followed by Goldman Sachs and Wells Fargo tomorrow morning.    

Disclaimer: SIA Wealth Management Inc. (SIAWM) specifically represents that it does not give investment advice or advocate the purchase or sale of any security or investment whatsoever. This information has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. None of the information contained in this document constitutes an offer to sell or the solicitation of an offer to buy any security or other investment or an offer to provide investment services of any kind. As such, advisors and their clients should not act on any recommendation (express or implied) or information in this report without obtaining specific advice in relation to their accounts and should not rely on information herein as the primary basis for their investment decisions. Information contained herein is based on data obtained from recognized statistical services, issuer reports or communications, or other sources, believed to be reliable. SIAWM nor its third party content providers make any representations or warranties or take any responsibility as to the accuracy or completeness of any recommendation or information contained herein and shall not be liable for any errors, inaccuracies or delays in content, or for any actions taken in reliance thereon. Any statements nonfactual in nature constitute only current opinions, which are subject to change without notice.

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At SIA Wealth Management everything we do is based on Relative Strength Analysis. We evaluate the Relative Strength between asset classes giving us insight into money flows on a large scale, and from this select top ranked investments.

Colin Cieszynski, Chief Market Strategist
Market Commentary:

Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

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