2021 if the vaccination is successful, which would be a very good thing, the next step will be to raise interest rates and begin to pay down debt. During the pandemic, governments close down many venues where people meet and gather which caused massive disruptions to employment. To counterbalance the effects was to send people and businesses money, as the vaccinations reach a level where there can be concerts and people in stadiums safely, the big concern among policy makers will be inflation.

In an article by Saikat Chatterjee of Reuters, President Biden proposed an increase spending to people, businesses and states as a hopefully final bridge. This spending means more government spending and eventually inflation will rear its head, although do not expect high rates in 2021, but rates for the US Treasury yields are above 1.1%, a 9 month high.

The fed may or may not start tapering a $120 billion a month asset purchase program paving the way for more than a 1/4 interest rate in 2023. Although Janet Yellen has signaled she does also wants to do something about income disparities.

Eurodollars futures maturing in 2023, now expect as much as 40 basis points in cumulative rate increases. The futures are a bet on the direction of the short term London interbank offered rate (Libor), one of the most widely used interest rate benchmarks in global financial markets. Investors hedge interest rate risk in the Eurodollar market.

Morgan Stanley expect tapering by the fed to begin in January 2022 with the fed buying government debt by $10 billion less and buying $5 billion less mortgaged back debt a month with an aim to stop in 2023.

Linking to dividend paying stocks, inflation may be of concern, but in a K shaped economy many people have not seen a rebound in their jobs or income, President Biden is concentrating on them. When we see a more fully shaped rebound, then we can worry about inflation and whether it is best to be in dividend yields or interest rate yields. For the next year, the concern will primarily be analysts and academics.

There are more questions than answers, till the next time – to raising questions.