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The QQQ Is Correcting, Other Indexes Are Consolidating (Technically Speaking For 3/9)

Mar. 09, 2021 7:55 PM ETIWM, SPY, QQQ9 Comments
Hale Stewart profile picture
Hale Stewart


  • Central banks face a challenging few weeks.
  • The latest stimulus is pure Keynes.
  • The markets are still mostly consolidating.

The latest round of central bank meetings will be challenging (emphasis added):

Optimism that Covid-19 vaccines and continued government stimulus offer an escape from the worst health crisis in a century has sent bond yields soaring and pushed bets on rising inflation in the U.S. to the highest in a decade.

That’s shifting the ground underneath monetary policy makers who promise to maintain rock bottom borrowing costs and cheap money well into the expansion. In the next two weeks, the Federal Reserve and European Central Bank as well as their counterparts in Japan, U.K, and Canada are all likely to reiterate those pledges, eager to secure a rebound in hiring and avoid the mistakes of the last crisis when some withdrew support too early.

The risk now seems skewed the other way. While policy makers welcome a modest rise in bond yields as a signal of confidence in the economic outlook, they worry an unchecked jump would undercut recoveries. They argue any resurgence in inflation will be based on a temporary correction from last year’s slide and that high unemployment will continue to restrain price pressures.

I think the reality is actually far simpler. First, as I noted in my weekend column, interest rates are returning to levels associated with an economic expansion. Although the pace of that move is unsettling markets, the underlying reason for the increase in yields is positive. Second, so far the rise in pricing pressure is temporary, caused by a combination of rising demand and virus-caused supply chain disruption. Expect central banks to stay their ground. What we're looking for in the next round of communications is any hint that banks are rethinking their support.

The second stimulus bill is mostly Keynesian stimulus:

President Biden’s stimulus package, which passed the Senate on Saturday, represents one of

This article was written by

Hale Stewart profile picture
Hale Stewart spent 5 years as a bond broker in the late 1990s before returning to law school in the early 2000s. He is currently a tax lawyer in Houston, Texas. He has an LLM in domestic and international taxation (MagnaCumLaude). He is the author of the book The Lifetime Income Security Solution. Follow me on Twitter at @originalbonddadYou can read his legal analysis on his law office's blog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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