Jay Powell made repeated calls for additional fiscal support last year, emphasising the “dire consequences” if Congress failed to deliver. On Tuesday last week, during the first of two days of congressional testimony, the FOMC chair declined to offer his support for President Biden’s current economic policy. It took two days for the bond market to respond. But when it came, the reaction of Treasuries was brutal. IT shares fell heavily.
Friday’s price action was perhaps telling. The S&P IT index managed only a partial recovery, rising 0.6%, despite the 10 basis points drop in the 10-year Treasury yield. IT shares are proving hyper-sensitive to the prospect of higher borrowing costs.
Critics wonder whether the Biden administration should be putting more effort into ramping vaccinations. The $1.9tr fiscal stimulus might then be superfluous. It is a fair point. Memo to Biden and Yellen: the technology boom went hand in hand with the secular decline in Treasury yields. It also pushed the African American unemployment rate down to a record low. This is now under threat by a misguided, unsustainable fiscal policy.
Summary
• Biden’s policies are all wrong. Equities have peaked
• Deflationary squeeze in EVs, part 2
• Tesla sell-off reflects wider market problem
