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Monday markets: Infrastructure rally beats potential Fed taper tantrum

Written By | Nov 8, 2021
infrastructure rally, taper tantrum

Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection. (See link below article.) Slightly modified to suit CDN format.

WASHINGTON – Well, that was an interesting weekend! The Pelosi-crats finally got most “progressive” (read: “Commie”) backbenchers to cave on their “two inflationary bills, not one” game. Monday markets rallied hard as a result. This infrastructure rally even headed off the potential Fed “taper tantrum” we feared last week when the Federal Reserve announced it would start withdrawing the stimulus punchbowl in December.

Perhaps panicked by their thorough shellacking in last week’s Virginia elections, House Democrats managed on Friday, with the help of 13 RINOs, to pass the latest Brandon administration-favored infrastructure legislation. That completes the legislative circuit on this one, kicking off Monday’s robust infrastructure rally. Now this inflationary monstrosity heads to the White House for our virtual president’s “X.” At which point the pork begins to roll for those companies and unions that bankrolled last year’s virtual presidential election.

Irrational exuberance returns to Wall Street

So forget that potential taper tantrum. (For now.) As we approach 2 p.m. ET, we see US stocks and market averages pulling back a bit from the irrational exuberance we witnessed at Monday morning’s opening bell. Even so, we see that the major averages continue to post at least 0.25% gains at the moment as some of the morning’s biggest rallying stocks loose a bit of oomph via some understandable short-term profit-taking.

Innovative Income Investor’s Tim McPartland posted a good summary detailing the opening action that thus far characterizes our November 8 Monday markets.

“The S&P500 moved higher last week by almost 2%–up, up and away–it seems like there is no end to rising equity prices and folks betting against common stocks have been soundly shellacked. In general the old saying that ‘you can’t fight the Fed’ has been absolutely true. While tapering is coming soon I don’t look for huge negative action in equities for now–someday–maybe.

“With the announcement of Federal Reserve tapering to occur later this month was totally expected and had no negative effect on markets–the 10 year treasury fell sharply, closing at 1.45% down 11 basis points from the previous Friday. Certainly this fall was not expected, but you can count on the marketplace making fools out of the talking heads which make predictions day after day.”

So, bye-bye taper tantrum. (We think.)

Never make stock market predictions

This kind of market complexity explains why we rarely, if ever, make stock market predictions here. If you go public with a prediction, Murphy’s Law guarantees you’ll get egg on your face. And soon. It rarely fails. We certainly failed to predict today’s rally.

True, today’s infrastructure rally favored what one might broadly call “infrastructure stocks.” Unfortunately, pork-mad Democrats considerably broadened the meaning of “infrastructure” in their latest Porkulus Bill. No one of course had time to read this 2,000+ page monstrosity, copies of which were dropped on legislators just hours before the latest vote on it. Who knows? Among other sops to unions and big Democrat donors, a small subsection of this text, likely reduced to 4-point type, probably defines Hunter’s brilliant original paintings as “infrastructure” as well. After all, it does stimulate another key player who routinely enjoys the fruits the Democrats’ far left political machinations.

Infrastructure rally give a boost to actual infrastructure stocks. Like Caterpillar and Cleveland-Cliffs

Some real infrastructure stocks did get a nice boost Monday. Happy companies include Dow giant Caterpillar (NYSE:CAT), many oil and gas stocks, and numerous industrial stocks as well. These include our current fave, Cleveland-Cliffs (NYSE:CLF).

We climbed back into these shares late last week. We actually sold off our earlier position earlier for a modest profit. That occurred after we watched, with disgust, the relentless army of regular Cliffs short sellers massacre the stock again after the rally. You simply can’t fight these die-hards once they rev up their engines. Better to take the profits you can get and run.

But when these shares hit a short-term bottom late last week, we started climbing back in. And, sure enough, they decided to rally again once the shorts took a day or two off.

Cliffs shares probably need to top $27 per share this time to start another short squeeze. Maybe that intrepid Reddit crowd will get back to this game again to help. You never know.

But pharmaceutical stocks remain a puzzle

After Pfizer (NYSE:PFE) – whose PR flacks and resident geniuses at market timing – touted their own new Covid-19 pill, Merck’s (NYSE:MRK) hitherto soaring shares got taken to the woodshed, killing off their earlier ~10% rally based on their own Covid pill’s approvals in the UK and pending in other international jurisdictions.

On the other hand, Regeneron (NASDAQ:REGN) shares got a boost today for their own novel drug-cocktail remedy, successfully used by physicians to treat President Trump in 2020. It’s off to the races these days for anyone coming up with some flavor of perceived Covid remedy.

One further factor boosting these controversial “vaxxes” and related remedies? Perhaps the not-coincidental end of America’s international travel ban (on international travelers to the US) managed to help. This ban, which lasted well over a year, came to a qualified end today. This simple fact, in turn, goosed many travel-related stocks.

Monday’s wrap…

Within reason, it remains party-time today on Wall Street. Many Covid-beleaguered sectors sprang back to life, a direct result of Monday’s infrastructure rally. Investors jumped back into these shares, greedily eyeing future lavish profits they’re sure to reap due to our latest return to some kind of alleged normalcy. At the same time, they quickly dismissed any possibility of a nasty taper tantrum. Like the ones we endured in the recent past.

Our fear is that this fall’s surprisingly healthy bull market could abruptly hit a wall. Don’t forget what happened to our post-July 4 2021 return to normalcy? (Masks on anyone? How a bout a nice  booster shot?)

Like everything else, stocks can’t always go up and sometimes must come down. Many companies’ shares seem considerably overpriced. But as Instapundit’s Glenn Reynolds likes to say, if something can’t go on, it won’t. Even in the midst of an infrastructure rally.

Anyhow, we’ll enjoy the fun while it lasts. Meanwhile, we wait for the next outrage to emerge from our nation’s corrupt capital city. Don’t worry. It always happens here.

In the meantime, have a good one.

Headline image link: Cartoon by Branco, courtesy of Legal Insurrection.

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17