A drop in economic knowledge in September could put the inventory market in a higher position by the end of the year as the Fed remains accommodative and committed to its stimulus efforts, Fundstrat’s Tom Lee said in a note on Wednesday.
The expiration of moratoriums on evictions and mortgages at the end of August represents a big unknown that will trickle down to the economy, leading to weak economic knowledge in the coming weeks, Lee said.
Lee noted that more than 2 million tenants have benefited from the moratorium on evictions, and 750,000 evictions are now expected before the end of the year, and landlords regain the ability to ignore tenants who can’t pay rent.
The rise of the COVID-19 delta variant will also likely hamper customer trust in the coming months as the school year begins and instances remain high.
But the inventory market is expected to climb a wall of fear over weak economic knowledge as the Fed remains committed to its stimulus efforts, adding its monthly bond purchases and low interest rates, according to Lee.
“Delaying the cut would give money markets advantages,” Lee said. The Fed is expected to start with a lot to cut its $120 billion a month in bond purchases through the end of this year or early next year, according to the Fed’s final minutes. and comments from the Jackson Hole symposium.
“We think the most important conclusion is that we expect economic knowledge to relax, but this will definitely be seen as it tilts the Fed to arbitrariness. Therefore, postponing the fall is for the money markets,” Lee concluded.
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