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As Wall Street eagerly awaits Fed Chair Powell’s moment at Jackson Hole, most of the downbeat delta variant driven headlines suggest he may wish to tap the breaks before joining the hawkish members in starting the tapering of its asset purchases.  Investors are ramping up protection in Treasuries and in technology stocks.  The 10-year Treasury yield continues to hover around 1.25%, while the dollar holds onto this week’s gains against the euro.

The S&P 500 index is finishing a poor trading week on a high note as some investors remain committed to buying US stocks on every dip.

Return to office delays

Both Apple and Charles Schwab will delay return to office efforts until early next year, a sign that surging delta variant cases are derailing some reopening trades.  Apple also temporarily closed a store in South Carolina after more than 20 employees were exposed to or tested positive for COVID-19. 

Charles Schwab also delayed the full return to the office until January and also announced a 5% pay increase for employees. 

Work-from-home flexibility might prove to be a worthwhile strategy for corporations as many parents will likely have to deal with classroom closures for their unvaccinated children due to COVID cases that arise during the school year(classrooms will temporarily close and go remote until cases clear). A return to normal for many workers is not happening in September, nor is it likely to happen this fall. 

FX

The dollar is poised to have the best winning streak in nearly two months.  The greenback has been boosted on strong demand for Treasuries, an unwind of commodity trades, and slowing growth expectations.  The next big move for the dollar will likely occur after Fed Chair Powell signals whether he is joining the hawks in setting up a taper announcement next month or slow them down.  Given the risks to the outlook, he may choose to wait a month before deciding.

By Ed Moya