• FED says ‘RELAX”!

  • Investors remained a bit cautious – but appear more bullish today.

  • Joey redefines Infrastructure and softens on the corporate tax rate.

  • Gasoline stockpiles rise – causing oil to back off just a bit…

  • S&P 4100?  Just 7 days after 4000?  Hold on…..

  • Try the French Country Chicken.

Stocks did the dance…. They danced around all morning as the clocked ticked down to 2 pm…. the S&P trading as high 4083 and as low as 4068 and then it happened…. the minutes came out and guess what????  We DID NOT learn anything new at all…. (refer to my comments from yesterday).  The minutes revealed that the FED may be suffering from ‘bi-polar’ disorder – as they are expecting a ‘brighter outlook’ for the economy BUT many of the ‘participants’ continue to see the uncertainty as ‘elevated’. Jay refrained from suggesting that the FED is anywhere near making any changes to its bond buying program saying that it would likely be ‘some time before the conditions is met for scaling back the asset purchase program.’ 

The minutes also revealed that most of the brain trust at the FED expect rates to remain near zero through 2023……not until, but through……. which then supports the accommodative position……this even as the recent surge in 10 yr. yields suggests something different.  It suggests an improving economy, it suggests improved economic conditions, and it suggests that investors expect better days ahead…. So, stocks rallied in the minutes after the report came out, only to stall out and move just a bit lower…. before they ended the day in a split…. the Dow and S&P up while the Nasdaq and Russell moved lower. 

By the end of the day – the Dow rose by 16 pts or 0.05%, the S&P’s rose by 6 pts or 0.15%, the Nasdaq lost 10 pts or 0.07% and the Russell fell by 36 pts or 1.60%. The idea here is that the Russell - which are small/mid cap US stocks cannot take their profits overseas to avoid paying higher corporate taxes….so those names came under a bit more pressure especially as the corporate tax talk gains momentum. 

And I think that the indecisiveness of the action also suggests that investors do remain a tad bit concerned about inflation…while most of the officials do not see any outsized risk of inflation becoming an issue at all….they tells us ‘not to worry’…the more they say that, the more I worry…it’s like when I play golf – and trust me that is not often – When I address the ball and then someone tells me to ‘relax’!  RELAX, really?  And you think that is going to help me RELAX????  I get more wound up and then get more tense and BAM……well, let us not go there right now…. In the end – many analysts could not help themselves….as they searched for any hint around future action as well as whether the group was beginning to splinter….

Look – Fed Chair Powell has acknowledged that they expect to see a temporary spike in inflation over the next several months – and he emphasizes ‘temporary’ as he is already trying to jawbone the response by investors…. telling them again - well in advance of the print – not to worry…. let us see how that works out….

And now we are just 6 days away from the start of earnings season……and our friends at FactSet tell us that analysts estimates during the first quarter for the S&P 500 have risen by 6% to $39.86 up from $37.61 (reflecting a 25% increase y/y) …. Energy, Financials, Basic Materials, and Information Technology leading the pack of the 11 sectors that define the S&P.  (the others include – Industrials, Healthcare, Utilities, Consumer Discretionary, Consumer Staples, Communications and Real Estate). 

The excitement started yesterday after JPM’s Jamie Dimon released his 66 page shareholder letter – in it he talked about how bullish he is on America – in what felt like a pre-announcement for their coming earnings…and investors loved it…the sector – XLF rose by 0.5% - taking this group up 21% ytd….while JPM rallied $2.44 or 1.6% -leaving this stock up 24% ytd – and remember what I pointed out yesterday…..this stock has been building a base between $145/$155 in what feels like a possible breakout….and last nights close left it kissing $155/sh….Capisce?

In other highlights -

The CEO at Credit Suisse – Tommy Gottstein - is under fire from within……as the Archegos story continues to unfold….and it appears that his short tenure may be ending….as more and more details are exposed. 

Goldman under the spotlight for their actions in handling their exposure last week – with many asking – ‘Did they advise the buyers of those blocks that there was trouble brewing – knowledge that they had but the market didn’t.’   Let us see what SEC Chair Gary Gensler does about this question – considering his alumni status as a former Goldman partner…. I mean – I am just asking…. It is a fair question – no? 

And Joey says that he is open to negotiating on the corporate tax hike but is also offering a new ‘Democratic’ definition of the word ‘infrastructure’……to include – home health care, early childhood education and paid leave…. to Webster’s dictionary’s definition of the word – that has stood the test of time….Webster’s defines Infrastructure as  - the underlying structure of a country and its economy – the fixed installations that it needs to function – roads, bridges, dams, water and sewer, rail, subways, broadband, electric, you get the picture right…..it’s Infrastructure….this isn’t rocket science….and while we all support the needs of home health care, childhood education and paid leave – let’s be honest – it is NOT infrastructure as per the definition……So provide for it, but not in an infrastructure bill.  But that is another conversation…. In the end – keep your eyes focused on Senator Joe Manchin – as he is apparently the ‘key holder’ for the Democrats……

And Andy Cuomo continues to give New Yorkers a reason to leave…. yesterday signing a $4 bil tax increase package for the citizens of NY – making it the highest taxed state in the Union – even California was surprised….……. Florida real estate just went a bit higher….

This morning – US futures are confused ….…. the Dow is down 17 pts, while the S&P, Nasdaq and Russell are all up – 15, 125 and 25 pts, respectively.  There are only two data points today…. Initial Jobless Claims of 680k and Continuing Claims of 3.6 million…. the chatter today – will be more about the FED minutes yesterday and which sectors stand to benefit in the improving economy. 

I still believe that 2021 will be the year of Value vs. Growth….and all that means is that Value will outperform growth – it does NOT mean you throw growth out the window…it just means – you might need to rebalance what it looks like.  So far, the value trade has well outperformed the growth trade….and this is reflected several ways….
SPYV (value ETF) up 12%, vs. the SPYG (growth ETF) which is up 5%, the Dow is up 9%, the Russell is up 13%, the S&P is up 8% - all beating the Nasdaq (which is the ultimate definition of Growth) which is up 6% ytd. 

After yesterday’s FED minutes…. the 10 yr. continues to retreat – currently yielding 1.64% all while the 30 yr. advanced slightly to 2.44%.  Investors currently in the camp that its ok……. that is until it is not….so the question is – what is the next pain point for investors?  1.8%?  2%.... Meanwhile, Janet Yellen pushing for a plan to catch about $2 trillion of corporate profits that have evaded taxation….  - which will help fund all this spending, potentially reducing the need to borrow more – which could in the end drive rates higher…

There are some that are calling for a 3% Treasury and 3+% inflation rate by year end….and if that happens…. we will be having another conversation…. But let us not go there right now. 

European markets are just a bit higher…. following a positive session in Asia – as global investors appear to be settled after yesterday’s FED minutes and their commitment to continued stimulus/support.  European and UK drug regulators coming out in support of the AstraZeneca vaccine – acknowledging that while blood clotting disorders are possible - the benefits still outweigh the risks….

As of 6:30 am – the FTSE + 0.24%, CAC 40 + 0.37%, DAX +0.01%, EUROSTOXX +0.22%, SPAIN -0.27% and ITALY -0.12%. 

Oil is off 50 cts at $59.26 after the Dept of Energy released a report that showed a big increase in US gasoline stockpiles over last week – yet crude stockpiles FELL…..and this caused the naysayers to raise the flag and start telling everyone that demand is weakening at a time when supply was rising – its’ exhausting…..and then you have the Iran story and the OPEC story….and before you know it – the price of oil comes under a bit of pressure…  It though remains in the $55/$65 range….as it struggles to hold onto $60.    

Bitcoin – is trading at $56,600.  Ethereum is trading at $2000. 

The S&P closed at 4079…. after trading in the same range as Tuesday - 4068/4086 - just waiting for the next real signal that will define the next move.  Will it be up, or will it be down?  Has the market already priced in the better-than-expected earnings….? Maybe – so the move will be defined by what we hear the C Suite say….and yesterday’s Jamie Dimon letter clearly is setting the stage.

Again – watch for 4086 – as trendline resistance, my sense is that the market wants to test it and it wants to try and pierce 4100…. I say – watch out…. just be careful….

Remember – as a long-term investor – you need to eliminate the daily noise and focus on the plan. Do not become emotional…. Take advantage of the move in prices to rebalance your portfolio so that you are not overexposed or out of balance – this will protect you.

French Country Chicken 

6 lg. potatoes – sliced in half and then sliced in qtrs. Lengthwise, Chicken pieces, legs, thighs, s&p, like 5 crush garlic cloves, herbs de Provence, fresh chopped Italian parsley, dry white wine (you can use chicken broth if you prefer), olive oil.

Preheat oven to 425 degrees - Add enough olive oil to cover bottom of roasting pan…let heat up.

Combine – the garlic, oregano, parsley, and white wine (or broth) in a small bowl – set aside.

Season the chicken pieces with s&p…toss in a bit of olive oil.  (just enough to give it a glisten).  Now add to the roasting pan – skin side down.   Bake for 15 mins…then turn, bake for 10 more mins…. juices should be running clear now…if not – then cook for another 5 mins or so……Now pour the garlic/wine mix over the chicken and cook for an add ’l   5 – 8 mins.  Remove and serve on a family-style platter with a large mixed salad dressed in a simple oil/vinegar dressing.

General Disclosures

Information and commentary provided by ButcherJoseph Asset Management, LLC (“BJAM”), are opinions and should not be construed as facts. The market commentary is for informational purposes only and should not be deemed as a solicitation to invest or increase investments in BJAM products or the products of BJAM affiliates. The information contained herein constitutes general information and is not directed to, designed for, or individually tailored to, any particular investor or potential investor. This report is not intended to be a client-specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. There can be no guarantee that any of the described objectives can be achieved. BJAM does not undertake to advise you of any change in its opinions or the information contained in this report. Past performance is not a guarantee of future results. Information provided from third parties was obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness.

Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. The price of any investment may rise or fall due to changes in the broad markets or changes in a company’s financial condition and may do so unpredictably. BJAM does not make any representation that any strategy will or is likely to achieve returns similar to those shown in any performance results that may be illustrated in this presentation. There is no assurance that a portfolio will achieve its investment objective.

Definitions and Indices

The S&P 500 Index is a stock market index based on the market capitalization of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s.


BJAM is an investment advisor registered in North Carolina and Arizona. Such registration does not imply a certain level of skill or training. BJAM’s advisory fee and risks are fully detailed in Part 2 of its Form ADV, available upon request.

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