Fed / Infrastructure Negotiations / US Budget for Fiscal Year 2022

Fed – Small Hint of Easing, a Yawner!

Our Federal Reserve Chairman Jerome Powell announced last week they will be selling the Individual Corporate Bonds and Corporate Exchange Traded Funds (ETF’s) purchased in 2020. 

The Fed purchased approximately 5.21 billion of Individual Corporate Bonds and 8.56 billion of Corporate Bond ETFs to support liquidity for corporations that needed to issue debt.

Last June, Powell said the Fed would HOLD the individual bonds to maturity however last week said they will be gradually sold, along with the ETF’s.

The total of approximately 14 billion is miniscule, compared to the 120 billion of combined US Treasury and Mortgage Debt the Fed is buying each month, which may be a reason the market did not care.  For me however, I believe it’s the gradual start to the Fed slowly pulling back on the massive amount of liquidity provided to support our economy and markets.

So how will the markets react when the Fed starts to hit the brakes?  Perhaps a bit of volatility, however based on the economic and market recovery so far, it certainly seems necessary, and that should not be the lone reason to derail our recovery.

Powell has a history of letting the markets direction change his mind, so he’s hard to predict!! Think back to the 4th quarter in 2018!

Last week the markets yawned at the bond sales, as the Dow Jones rose .69%. the S&P 500 .64%. the Nasdaq Composite .49% and the Russell 2000 .78%.

Over the pond, foreign stocks rose .73% and Emerging Market equities rose 1.60%.

Infrastructure Bill

The desire to have an agreement on President Biden’s Infrastructure bill by Memorial Day has obviously come and gone.  Both sides did negotiate bringing the price tag much closer together, however at this point they are far apart.  It appears as the Democrats will go forward using Reconciliation to move many parts of the bill closer.

It appears it’s the definition of infrastructure that will prevent a bi-partisan bill, which would have been a welcome occurrence considering our political divide!


**Stay tuned for info on the US Budget and what to expect for Fiscal Year 2022** I’m having fun reading the Department of Treasury Document!!!






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