Weekly Market Commentary
July 13, 2021

The Markets vs Inflation, Covid, and Bond Yield

There was an emotional block in financial markets last week as equity investors slowed to see what the United States Treasury bond market was up to.

A new wave of COVID-19 swamps the global recovery. Twenty-four U.S. states saw the number of COVID-19 cases move higher by 10 percent or more last week. The Delta variant of the virus accounts for more than one-half of all new cases. Last week, the global death toll reached 4 million and Japan, host of the 2020 Olympic games, declared a state of emergency.

China’s banking system is in trouble. There was another surprise last week. “…China’s central bank announced a half a percentage point cut to banks’ reserve ratio requirements, potentially increasing the profitability of their loans but also stirring concerns about the health of their balance sheets following a debt-fueled property boom,” reported the Financial Times.

U.S. economic growth falters as monetary and fiscal stimulus recede. “…the bond market is now adjusting to the prospect of more moderate growth in the second half, with reduced fiscal largess and no $1,400 or $600 stimulus checks. And it’s looking ahead to the eventual prospect of the Federal Reserve throttling back its securities purchases, which currently pump $120 billion a month into the financial system,” reported Barron’s.

Investors shook off the bond market’s signal and took advantage of buying opportunities created by the dip. Major U.S. stock indices finished the week higher.

When was the Euro 2020 tournament played? If you’re a soccer fan, you know the answer is last month. The tournament took place in 2021, although the name was not changed because the tournament was intended to celebrate the 60th anniversary of the European Football Championship, which occurred in 2020. Also, the merchandise had already been produced with a 2020 logo.

The tournament final (England vs. Italy) had yet to be played when this was written, but it’s never too early for tournament trivia. See what you know about Euro 2020 by taking this brief quiz.

1. There were more ‘own goals’ in Euro 2020 than in all other European championships combined. How many were there before the final match?
a. 5
b. 6
c. 9
d. 11

2. What is the nickname of the Italian national team?
a. Il Nerazzurri (The Black and Blues)
b. Gli Azzurri (The Blues)
c. Le Rondinelle (The Little Swallows)
d. Il Toro (The Bull)

3. How many major tournaments had the English national team, nicknamed The Three Lions, won before the Euro 2020 final?
a. 1
b. 2
c. 3
d. 4

4. Euro 2020 prize money was about 10 percent higher than Euro 2016 prize money. Every team that participated in the tournament earned about £8 million (about $11 million). How much did the team that lifted the winning trophy earn?
a. About £12 million (about $17 million)
b. About £17 million (about $24 million)
c. About £24 million (about $33 million)
d. About £33 million (about $46 million)

The Economist explained the importance of European football like this, “On a continent where the facets of nationhood are disappearing, be they banal (customs arrangements), the everyday (currency) or the emotive (borders), football is a way of clinging on.”

Answers: (1) d; (2) b; (3) a; (4) c

Weekly Humor

“It was hard to have a conversation with anyone, there were too many people talking.” – Yogi Berra, at a White House dinner party