Week Ending July 23rd, 2021

On last Monday, Dow tumbled more than 700 points intraday. It was a risk off session and it felt like the sell off would continue for couple of days, but all the fears were gone by Tuesday. All news headlines were blaming rising delta variant cases mostly. But I think the market participants have been looking more worried about the inflation, forward path of the monetary policy and peak concerns.

Although the major stock indices have recovered the from the last Monday’s drop and it was a net positive week. The fundamental problems remain the same and I attribute this quick comeback to liquidity provided by the monetary and fiscal policy over the last 12-15 months. This “buy every dip” mentality will remain in place until we see significant shift in the policy.

Federal Reserve’s meeting will take the center stage this week and it is being expected that Fed will provide some kind of hint towards the taper timeline. I think its high time for Fed to pause its monthly purchases by last quarter and start tapering early next year.