Article Image
IPFS News Link • Economy - Economics USA

Rabobank: What Is Coming Is A Bigger Economic...

•, By Michael Every

Where's the beef? (And pork and chicken?)

Yesterday US stocks had the temerity to go down. Not a lot: S&P -0.13%, Dow -0.2%-- but red, not green. It's apparently headline news. More significantly, markets are worrying the all-time high in stocks might not last for all time. The chatter / whisper is of a possible correction which, to be fair, it has been for a long time as stocks have kept levitating regardless. Meanwhile, as Treasury yields dropped to reverse the previous day's climb, 3-month USD LIBOR is still only just above the lowest level this year at 0.11% vs 0.24% at the start.

For markets, where is the beef? The LIBOR trend is nothing new, and reflects excess liquidity via QE, as already evident in reverse repo action, etc. On stocks, the issue is again QE: when does the music stop? On that front, the analogy of musical chairs is a good one. (As it is for the potential Fed Chairs, Powell and Brainard, too.)

Vis-à-vis QE, the Fed's Beige Book was long "shortages". "The US economy strengthened further from late May to early July, displaying moderate to robust growth," beiged the book, an upgrade from "moderate" in the spring. However, "Supply-side disruptions became more widespread, including shortages of materials and labor, delivery delays, and low inventories of many consumer goods"; that as global shippers underline supply chain snarls will last well into 2022 at least. Indeed, as the 'force majeure' news in fertilizer production this week made clear further hefty US food-price increases can be expected well into 2022 too, the National Economic Council's Deese was rolled out to explain that if you exclude beef, pork, and poultry, price increases "are more in line with historical norms." (No hedonic adjustment to chickpeas to solve the CPI problem?)