Record highs for stocks, vaccine mandates are coming, soft PMIs, housing strength, Jackson Hole expectations, bitcoin hovers near USD 50k

US stocks rallied to record highs after both Pfizer’s vaccine was granted full approval by US regulators and on expectations Fed Chair Powell won’t trigger tantrum and signal that an eventual taper announcement does not preclude interest rate hikes.  The cherry on top of today’s rally is high expectations that the Biden administration is getting closer to delivering both infrastructure and budget reconciliation.  With the House back in DC, two historic votes are expected to pass, which means many traders will be surprised that Biden is getting his USD 3.5 trillion budget resolution.

The big story on Monday was the FDA’s decision to remove the emergency use authorization label from the Pfizer COVID vaccine, which now paves the way for many companies and government agencies to enforce vaccine mandates.  Another positive development in the fight against COVID is that the US might finally be seeing the peak in the delta variant surge in the South.

COVID vaccine mandates are coming and that could move the needle here in getting the US closer to herd immunity.

US Data

The delta variant was a clear drag in the flash global PMI readings.  Europe clearly remained in expansion territory, but both the manufacturing and service sectors showed weakness, while the US posted a significant deceleration in services.

The release of Existing Home Sales in July came in much better than expected.  Cash-filled investors are buying up properties, helping take the headline month-over-month increase to 2.0%.  Housing price appreciation is slowing and while today’s hot read surprised many, the peak in the housing market is firmly in place.

The US economy is still on sound footing, it is just decelerating but that should be short-lived once the South sees COVID in the rear-view mirror

Jackson Hole could be a dovish event

The Kansas City Fed was forced to switch the heavily anticipated Jackson Hole Symposium from in-person to remote.  Cases are spiking in Wyoming and that has triggered a code red which restricts meetings.  Jackson Hole will be virtual again and that makes it unlikely the Fed will want to signal they are ready to slow the pace of asset purchases.

The Fed’s minutes signalled a taper announcement will happen this year, but delta variant risks will likely make Jackson Hole a somewhat dovish event.  The Fed may make a taper announcement in September or November, but it will probably be a slow taper with no commitment over interest rate hikes.

Bitcoin

Bitcoin tentatively broke above the USD 50,000 level on renewed enthusiasm from retail investors.  Many institutional investors don’t want to miss out on this current fast appreciation.  Initially, the capital gains taxation fears were viewed as a negative for the cryptoverse, but that may have just made more traders hodlers.

For Bitcoin to hit fresh record highs, new investor interest needs to continue to grow.  The institutional world should deliver steady inflows as long as the regulator fears ease and on continued progress over transitioning to cleaner energy for mining.  Bitcoin could be ripe for a fast appreciation here and might not hesitate making a run for USD 60,000 if appetite for risky assets remain intact post-Jackson Hole.

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