So, I think the Fed will essentially toe the line and point to their transitory wins while emphasizing the Delta situation has maybe added some economic headwinds that might push their path to tapering out a bit.
How will markets react to this in the week ahead?
Well, I don’t really think this view is going to surprise anyone so its kind of consensual at this point. The indices are sitting at all-time highs essentially with mega caps doing well and tech/retail/financials generally on cruise control. The weakness of late has been in travel/leisure/cyclicals/biotech and a certain subset of covid winners. So, outside of betting on a rotation (note i’m in this camp) back into those names as delta fades you really need to be more of a stock picker in this environment. Because you can’t exactly be like I’m going to buy Msft/Goog/Aapl here because there will be no taper this year as they generally cruised through the summer volatility. Maybe you can fish in some software names that have lagged a bit (wday/pd/crm/splk come to mind), but beyond that you’d really need to want to buy crappier beta if u wanted to trade this. It’s also very hard to not be wary of narrowing leadership when you’ve had a market like the one we have had the last year. So, if you have names that are up huge ytd, this is probably a good time to reduce them relative to solid businesses you own with somewhat sensible valuations that have underperformed. And if you have a strong conviction on the path Delta takes from here based on the data, well there is a long list of names you can buy with different degrees of levg to this last wave being the end of covid. (note I’m long bkng/ba as my way of playing this) So get ready for some rotation.