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The Federal Reserve's taper talks began yesterday in its mid-summer meeting, and the FOMC will announce a decision (if there is one) at 2 PM. Powell will break down the tapering decision in a highly anticipated press conference this afternoon (2:30 PM). The expectation of a 'lift-off' timeline has put pressure on rate-sensitive growth stocks. If the cost of capital (interest rates) increases, it will reduce the value of its projected future earnings (which are significantly larger than today's earnings for growing enterprises).
The markets have been waiting for a quantifiable tapering schedule since the beginning of 2021 as inflation ramps up amid this accelerated economic recovery. Pricing pressures are being seen across every sector of the economy, and the markets are looking to the Fed to control skyrocketing consumer costs.
I suspect that much of the discounting associated with a rate increase has already been pulled out of high-growth tech stocks. A tapering decision will come as a relief and likely result in counterintuitive price action when a plan is announced. Still, the proliferating number of Delta-variant cases may push the Fed's tapering timeline out.
The COVID-Variant Impact
The Delta-variant remains a genuine fear in the marketplace as this highly contagious variation of COVID spreads across the US. Another set of lockdowns could induce a full-on economic depression. The CDC updated its mask guidance yesterday for fully vaccinated individuals, stating that you should wear a mask in high transmissible locations no matter your vaccination status. This could instill another wave of mask mandates, which might once again discourage society from going out and spending on Main Street.
Analysts are already projecting that this variant will marginally slow down our economic recovery this quarter. Still, I am confident that the domestic impact will be negligible considering the vaccination rates (50% of Americans are fully vaccinated, and 58% have received at least one dose). Nevertheless, this notion weighs on stocks across the board, with potential disruptions in global supply chains now being added to equity pricing models. The COVID-variant will undoubtedly play a role in the Fed's tapering decision.
Image: Bigstock
Will The Fed Initiate 'Lift-Off' This Afternoon?
The Federal Reserve's taper talks began yesterday in its mid-summer meeting, and the FOMC will announce a decision (if there is one) at 2 PM. Powell will break down the tapering decision in a highly anticipated press conference this afternoon (2:30 PM). The expectation of a 'lift-off' timeline has put pressure on rate-sensitive growth stocks. If the cost of capital (interest rates) increases, it will reduce the value of its projected future earnings (which are significantly larger than today's earnings for growing enterprises).
The markets have been waiting for a quantifiable tapering schedule since the beginning of 2021 as inflation ramps up amid this accelerated economic recovery. Pricing pressures are being seen across every sector of the economy, and the markets are looking to the Fed to control skyrocketing consumer costs.
I suspect that much of the discounting associated with a rate increase has already been pulled out of high-growth tech stocks. A tapering decision will come as a relief and likely result in counterintuitive price action when a plan is announced. Still, the proliferating number of Delta-variant cases may push the Fed's tapering timeline out.
The COVID-Variant Impact
The Delta-variant remains a genuine fear in the marketplace as this highly contagious variation of COVID spreads across the US. Another set of lockdowns could induce a full-on economic depression. The CDC updated its mask guidance yesterday for fully vaccinated individuals, stating that you should wear a mask in high transmissible locations no matter your vaccination status. This could instill another wave of mask mandates, which might once again discourage society from going out and spending on Main Street.
Analysts are already projecting that this variant will marginally slow down our economic recovery this quarter. Still, I am confident that the domestic impact will be negligible considering the vaccination rates (50% of Americans are fully vaccinated, and 58% have received at least one dose). Nevertheless, this notion weighs on stocks across the board, with potential disruptions in global supply chains now being added to equity pricing models. The COVID-variant will undoubtedly play a role in the Fed's tapering decision.
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