Still Transitory After All These Years - Kuby's Commentary 06.14.2021

Since the end of April when Fed Chair Jerome Powell dismissed inflation pressures as being temporary, "transitory" has become the new bullish buzzword for the stock and bond markets. The 5% year-over-year increase in the consumer price index reported on Thursday was the biggest jump since August 2008, but apparently not big enough to disrupt the transitory thesis, as both markets rallied on the news. The bond market could be suggesting that an agreement on multi-trillion dollars of additional fiscal stimulus might not be achievable given the lack of bipartisan support. The two-day FOMC meeting that will conclude with a policy statement on Wednesday will be in focus. Any talk of tapering will unnerve the market while sticking to the view that higher prices are transitory will comfort investors. The COVID-19 trends have been very favorable in the U.S. However, there is a reason for concern as the vaccination rates have slowed down.