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T2 Asset Management

June 2021 Market Commentary

At some point, it becomes difficult to know what to say about today’s financial markets.  We watch as they morph into some kind of strange casino where no one ever loses. Don’t get us wrong, we would love that to be the case, but don’t believe it will end that way. 2021 and 2020 as well have been the strangest of environments. No matter what the economic background, participants or maybe automated computer traders buy every dip in the market instinctively and continue to be rewarded.

We have described in this commentary that the reason for all this continues to be the epic supply of money that the Federal Reserve and the Federal government are printing and spending. We are witnessing live experimentation with what is known as Modern Monetary Theory. The basic idea is that as long as you still have paper and ink, you can print and spend all the money you want. What could possibly go wrong? Well, inflation is the answer, and we are seeing it all around us. However, even some worrisome inflation numbers this month did not stop the dip buying again.

Below we see the consumer price index, and any of you that eat, drive, shop, or live somewhere are probably already feeling this.

 

 

 




Economic data for the month were mixed. Gross Domestic Product (GDP) rose at an annual pace of 6.4% better than the estimate of 6.1%. Non-farm payrolls had the biggest miss ever with 226K jobs added compared to expectations of 978K. Finally, retail sales showed zero growth missing expectations of up 1%.

When we put it all together, it is like the old question of which wins, the immovable object or the unstoppable force? We have what is arguably the most expensive stock market in history, combined with a weak economic backdrop and rising inflation. This would normally be a very bad thing for stock prices. However, the unstoppable force of printed money continues to be the dominant theme. We are well aware that this situation cannot continue indefinitely. The problem is when to run. This situation could continue for quite some time.

As we have been saying for quite a while, the best thing is to stay invested but not aggressively so. This is not a casino to go all in on.