This week we are watching, with great interest, the shifting sands of things the markets like to worry about.

One very substantial element is, at least here in the U.S., we are shifting from a Covid-driven economy to a normal’ one (whatever that may now mean). Re-openings are affecting travel, banking, retail, entertainment, dining out and much more. Shares of related companies are reflecting the shifts. But wait, all that glitters is not gold. Across the pond France has decided on another four weeks of lockdown – and they don’t even have a groundhog! Similar stories in Italy and Spain. Meanwhile, here at home (as well as abroad) the jitters-generator known as the Ten-Year Treasury Rate has cranked up the nervous nellies who fear the arrival of the inflation monster. Their reaction has been to sell down, mostly NASDAQ.

Speaking of inflation, which is what Fed Chair Powell was doing on Wednesday, both Powell and Treasury Secretary Yellen want us to not worry so much. I suppose it should be comforting that they are in agreement on a couple of key arguments: 1) Don’t get too excited if the monthly inflation numbers pop above the Fed target of 2%. We should only get excited if the inflation numbers show an average above 2% over a few months.  2) Yes, rising inflation usually means rising interest rates – adversely affecting equities. However, Janet Yellen and J-Pow are quick to add that as long as GDP growth is running ahead of inflation all should go swimmingly after all. And almost everybody is expecting very good GDP performance in 2021 as the recovery moves along. On the other hand, 2022 finds considerably less agreement. We’ll have to see.

I have a shade of discomfort over the idea that as long as GDP is winning the race, we’re all good. Reminds me of the story where two guys are in the Serengeti and are suddenly staring into the eyes of a very large lion — who is licking his chops. Immediately, one of the guys starts taking off his shoes. His friend asks ‘Why are you taking off your shoes?’ The first guy replies that he can run faster with no shoes. Second guy laughs and says ‘With or without shoes, you can’t outrun the lion!’ First guy says ‘I don’t have to outrun the lion. I just have to outrun you.’

And that serves as a reminder of why we happily come to work every day — knowing our top priority is to see that none of our clients end up being somebody else’s lunch.

Ron’s Market Minute — Whoa Baby!

When I suggested last week that we should expect more volatility, I hope you paid attention.

Most of the headlines this week have been about the Fed meeting reports. I couldn’t help but smile at one headline that suggested that this week’s Fed meeting would be ‘the Most Important Fed Meeting Ever’. Well, anything to grab your eyeballs, I guess. So, while the media would like you to presume that a trend (or a time period really too short to be a trend) will continue on unabated for _________ (fill in the blank- this week, this month, forever!) let me remind you that there is generally excessive volatility around those meetings, and market moves usually (the key word here) reverse themselves within a few days. 

My own belief is that there is plenty of upside left both for CPI and inflation expectations, but that we are still several months away from any clarity as to just how inflationary the radical mix of massive monetary and fiscal policies being pursued will prove to be in practice.

So, while you’re looking for something to calm your nerves, let me remind you that (as we’ve mentioned often before) ‘gridlock’ in Congress us often a good thing. We certainly have gridlock these days, as there seems to be NO agreement whatsoever on almost ALL key issues that Congress will tackle in the next couple of months.

Tuesday’s headlines (‘trial balloons’) on tax hikes (the largest since 1993!) probably got a lot of attention, but it’s quite likely that none on the right will agree to vote for higher taxes. And that’s a big positive for markets — as they may not have to worry about big new tax hikes. Other radical ideas like the Wall Street transaction tax have about as much chance as a snowstorm here in Phoenix today (It’s 80 degrees!).

Should they occur, across the board tax increases are likely to be moderate with the 50-50 split in the Senate — so any hikes will likely be less than ‘yuuge’.

The Pres said mid-week that he favors a few changes in filibuster rules, but NOT elimination! That likelihood of no major rule changes is another plus for markets.

Perhaps the passage of the 1.9 Trillion ‘Covid’ aid bill will be THE high point of the current administration as both sides bicker at every little snippet of potential changes. Although Biden had the votes (just barely) for the Covid bill, he may not be able to find the votes for anything else on that scale. And that’s another plus for financial markets. So, with the current status of gridlock everywhere, perhaps the markets can get on with the business of recovery from last year.

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com

LFS-3500875-031921

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners for use with advisory clients only and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw@denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.

Ron Denk is a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Mr. Denk is also an Advisory Representative offering services through Denk Strategic Wealth Partners, a Registered Investment Advisor. Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation.

Please see Denk Strategic Wealth Partners’ Client Relationship Summary here http://denkinvest.com/?page_id=7099 for succinct information about the relationships and services DSWP offers to retail investors, related fees and costs, specified conflicts of interest, standards of conduct, and disciplinary history, among other matters.

LFS’ Regulation Best Interest Disclosure Document, which describes LFS’ broker-dealer services, and other client disclosure documents can be found here <https://www.lfg.com/public/lincolnfinancialsecurities/clientinformation/overview/disclosure