Weekly Memorandum 8/2/2021
Stocks are mixed to start the week, with the Nasdaq being the only major index in positive territory. Stocks tagged new all-time highs last week, but closed lower on the week. Further downside this week could turn into a sell signal, but for now, the price action could be construed as a consolidation near the highs, which is typically bullish.
Interest rates were largely flat last week, but precious metals and cryptocurrencies saw nice bids. The dollar was largely down on the week, but staged a nice relief rally on Friday in an attempt to push back some of the bearish momentum. Crude Oil was nicely higher too. If the dollar continues to drop, we would likely see inflationary pressures continue their rise into year-end. Grain markets were mixed last week, with wheat leading the way higher.
We note that credit spreads remain very narrow, which means liquidity levels remain high. This should continue to bode well for equities, but given the Fed's multiple interventions in the Reverse-Repo market, there are signs that containing inflationary pressures is becoming increasingly difficult.