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The Doves Are Flying High – A Citizen’s Report

CAMS Weekly View from the Corner – Week ending 11/5/21

November 8, 2021

Today we offer an edition to the citizen in you. Realizing we all wear many hats that at times can psychologically conflict with one another we specifically are addressing the citizen within all of us. The “hats” that specifically come to mind would be the citizen’s hat along with the consumer, laborer and market participant/investor hat that come into play while reading these editions. An internal intuitive conflict within us can play out with Federal Reserve money printing and ultra low interest rate policies. Lots of printing jolts the market upward with a celebratory sense from the investor hat while the consumer in us cringes with the everyday pricing experience. Meanwhile, the laborer in us begins considering how can more be brought into the household to compensate for the consumer experience within us. All told, whether or not we consciously connect these hats together, they do play out in our living experience. Meanwhile, thinking of the citizen’s hat as the overriding “parent in the room” if you will, offers caution if not concern as to where the life experience is going in light of the experiences of the various hats offered. Doves & Hawks Members of our Federal Reserve are historically labeled according to how adamant they are (by their general views and policy decisions) in controlling inflation. A dove is one who is viewed as quite lax when it comes to inflation concerns/policy decisions while hawks represent a focus on controlling inflation via their policy decisions. With this, the doves are flying high and continue to be well in charge of general interest rate policies from our Federal Reserve. “Stocks Rise on Dovish Actions from the Fed” If you see headlines similar to the above you can interpret them as market participants pushed stocks higher in light of viewing Federal Reserve policy actions as being more lax than what was expected. This past week, post Fed meeting, this occurred. Stocks went up as they informed us interest rate policy will not be touched for now (that was expected) and the money printing will be reduced by $15 billion. Globally, other country central banks have been more aggressive in reducing their money printing and in some cases put an immediate halt to it out of concerns of stoking inflation further. Would our Federal Reserve do that type of action was a small but lingering question? They did not. With our Fed’s action, rather than expanding the money base by $120 billion per month they will increase it by $105 billion. The plan (called “tapering”) calls for each proceeding month to reduce said printing by an additional $15 billion. If this unfolds according to plan (Fed emphasized they will look at this month-by-month hence no certainty money printing will end completely) then by the middle of year 2022 the emergency printing policies of 2020 will have been concluded. Emphasis on Emergency Policy Action Chairman Powell consistently mentions the two mandates of the Federal Reserve: Price Stability and Maximum Employment. Historically the Fed has defined price stability as an inflation rate that is consistently 2%. Our current CPI is 5.4% and has run in the 4-5% plus range since early spring. The Fed’s Personal Consumption Expenditure measure (their favored inflation measure) is registering 4.4% – a 30 year high and also has been well north of 2% since early spring. For the bulk of 2021 we have chronicled the above price inflation pressures along with the incredibly tight labor market. So tight in fact we curiously wonder if there is an employer in the U.S. – across industries – who is comfortably staffed per their needs. Businesses unable to meet demand for desired goods and services in light of staffing issues have become the norm. The supply chain disruptions – a chain that is ran by people think staffing – have also become the norm. Meanwhile, per the Fed’s most recent post-policy meeting communications, the employment market needs to continue to improve. By-the-way, when Fed Chairman Powell was asked (a few times) the Fed’s definition of maximum employment he was unable to give a direct answer. More ambiguity. The significance? This is an entity that prides itself (literally) on transparency and was iterated again in his post-meeting communication. Zero percent interest rate policy stances and money expansion from the Fed of any type are explicit emergency policy actions. Dear citizen, where is the emergency relative to the Fed’s two mandates shared above? Strangely, the emergency to the citizenry relative to the Fed’s mandates seem to be price inflation but that is merely brushed on while the employment part is emphasized as needing further repair, although has certainly improved per the Chairman. The Doves Are Flying High With all of the above the doves at the Fed are flying high and are in charge. The investor hat may be content with this to the chagrin of the consumer and laborer hats via general prices and wages that are still unable to grow above price inflation levels even with the well advertised increase in labor wages via the tight if not “begging for help” labor market. We leave you with a quote from the official Federal Reserve Statement post Fed meeting last week. For my part personally, upon reading I stopped with confusion believing I must have clicked on the wrong link and was obviously reading a 2020 release. I was not. The underline is our emphasis within the quote.

Fed Statement Quote: (Link:

The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.

I wish you well – fellow citizen…

Ken Reinhart

Director, Market Research & Portfolio Analysis


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP). This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”. A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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