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By Jim Reid, chief credit strategist at Deutsche Bank

My theme this year has been that it’s going to be very complicated for financial markets with volatility high. The forces working in both directions (high growth and stimulus versus inflation and higher yields) are huge and both sides will dominate for periods causing us to move between extremes. There is little doubt that US growth is going to be very strong with our economists upgrading Q4/Q4 2021 growth to 7.5% last week.

With inflation this could mean nominal GDP getting close to 10%. The last time we were in double digits was the early 1980s. With these sort of numbers it has always seemed unlikely that bonds would have a calm low yield, low vol year. Even if growth and inflation eventually roll over in 2022 and 2023 we are not going to know for a few quarters yet. In addition without knowing who is going to win the mid-terms we can’t be sure that the Democrats aren’t going to dip into the fiscal well a few times more before the next Presidential election. When I talked about the inflation picture slowly turning before the pandemic, the major reason was that I thought we were moving more towards a helicopter money / MMT world and away from fiscal austerity. The pandemic has accelerated this and a Blue Wave has picked up the baton in its crest.

In risk, while many sectors and areas will benefit more from strong growth than lose out from higher yields, there is no doubt that some areas (eg US equities) are more exposed to secular growth (eg tech) than before and these have massively benefited from ultra low yields. This is a sizeable and influential part of the market.

Having said all this, there is little doubt in my mind that central banks will eventually lean quite hard against a sustained rise in yields. They simply can’t afford to see it happen with debt so high.

So far though, Fed officials have been largely relaxed over the recent moves, suggesting that it reflects more positive economic growth. But as it all happened so fast last week they will have had a chance to regroup and align their message for this week.

I’ll end this yield discussion by quoting my colleague Francis Yared (head of rates strategy) who said that the recent move had probably “happened too fast, but did not go too far”. He thinks that the (mildly so far) dysfunctional nature of the repricing should lead to some level of central bank intervention. It would make sense for the Fed to push back against front-end (up to Dec-22) pricing and the ECB to lean against the rise in longer-term real rates. However, from a medium-term perspective, the absolute level of yields is not too high given reflation proxies, the prospects for reopening and US fiscal policy

Biden is expected to roll out with sanctions this week penalizing Putin’s government for the alleged poisoning of Kremlin opposition leader Alexey Navalny. CNN cited two admin officials to say it will “happen in coordination with the European Union” but is still being “fleshed out by US and EU officials in the coming days.”

The officials said it’s part of Biden seeking to send a “strong message” to Russia as well as China and others that they can’t violate human rights with impunity.

Last month cities across Russia were hit by large, well organized and closely reported mass demonstrations in support of the jailed Kremlin critic, recently sentenced to 2.5 years in prison on a prior probation violation.

Currently all “options” for sanctioning Russia are said to still be under review ahead of the impending announcement, which can include the following:

The package proposed three types of sanctions: Magnitsky Act sanctions on the individuals who detained Navalny; sanctions under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (CBW Act); and sanctions under Executive Order 13382 — which is “aimed at freezing the assets of proliferators of weapons of mass destruction and their supporters,” according to the State Department.

And further according to the latest CNN reporting, “One option being discussed is an executive order focused on Russia which would trigger sanctions on the country for multiple assaults on US democracy and American personnel — including the SolarWinds hack and the bounties put on US soldiers in Afghanistan — in one package, one official explained.”

White House press secretary Jen Psaki previously said that Biden’s “intention was also to make clear that the United States will act firmly in defense of our national interests in response to malign actions by Russia.”

Both the administration and the media are also now hyping that Biden’s “tough” stance on Russia stands in contrast to Trump’s handling of Moscow – despite the fact that Trump controversially ended cooperation on things like landmark arms control agreements, and further opened up Washington’s ability and that of US companies to send arms to Ukraine. 

Authored by Ryan Ledendecker via The Federalist Papers (emphasis ours)

The fight for the return of millions of schoolchildren to in-person learning continues to rage on, with various teachers unions wielding their political power to seemingly quash the idea, leaving America’s parents and students in a constant state of limbo while their academic progress continues to decline with remote learning.

That’s why Berkeley Federation of Teachers president Matt Meyer, who has incessantly preached about how unsafe it is for students to return to the classroom, came under fire from a local group of concerned moms after he was spotted dropping off his two-year-old daughter at a private learning institution for in-person learning, according to Fox News.

Guerilla Momz, a California group of concerned parents who are pushing for a return to in-classroom learning, captured video footage of Meyer dropping off his child, holding nothing back as they criticized his hypocrisy.

“Meet Matt Meyer. White man with dreads and president of the local teachers’ union,” the group tweeted. “He’s been saying it is unsafe for *your kid* to be back at school, all the while dropping his kid off at private school.”

Meet Matt Meyer. White man with dreads and president of the local teachers’ union. He’s been saying it is unsafe for *your kid* to be back at school, all the while dropping his kid off at private school:https://t.co/BAIR5xH8LY#OpenSchoolsNow

— guerillaMomz (@GuerillaMomz) February 28, 2021

 After the video went viral around the country, Meyer was contacted by Fox News and, not surprisingly, attempted to justify his reason for taking his young child to in-person classes at a private institution while public school students remain in the dark.

“There are major differences in running a small preschool and a 10,000 student public school district in terms of size, facilities, public health guidance and services that legally have to be provided,” Meyer said. “We all want a safe return to school. The Berkeley Federation of Teachers is excited that Berkeley Unified will be reopening soon with a plan, supported by our members and the district, to get our students back in classrooms starting later this month.”

Meyer also took issue with the group of concerned mothers taking the video and posting it, calling it “very inappropriate” and remarked that it was a clear violation of his child’s privacy.

Some, like former PTA Berkeley Council president Mara Kolesas, said that Guerilla Momz took their attempts to expose Meyer too far and suggested that it’s an issue that needs to stay in the political realm.

“For me, you don’t need to attack people personally, you need to address it politically. When you start getting personal, you mix up dimensions, and you don’t get to discuss the real thing,” Kolesas said. “Here, the real thing is [Meyer] put fear before science, and the right of teachers before the right of kids. That’s the issue.”

While the idea of addressing the issue “politically” sounds good on paper, unfortunately, it’s not working. That’s ostensibly why the group of moms did what they did, to expose those who publicly insist on keeping kids home while quietly ushering their own children off to swanky, private institutions.

And Kolesas is simply flat wrong about Meyer “putting fear before science.” The “science” is clear — it’s absolutely acceptable and and completely safe to return children to the classroom, “politics” is what’s keeping that from happening.

After a weekend of torrential rain, Kentucky Gov. Andy Beshear declared a state of emergency on Monday. State officials activated the State Emergency Operations Center to aid with rescue efforts as major flooding was observed, according to Lexington Herald-Leader. 

The declaration activated the Kentucky National Guard to assist first responders in water rescues, deliver supplies, and aid municipalities. 

“The impact of extremely heavy rainfall and flash flooding across the commonwealth led to numerous emergency rescues and evacuations in counties from west to east,” said Michael Dossett, director of the Kentucky Division of Emergency Management.

Three-day precipitation totals ending Mar. 1 show from Bowling Green to Somerset to Jackson to Pikesville at least 4 inches of rain was seen, in some areas, the totals are much higher. Bowling Green saw 5 to 7 inches, according to Meteorologist Ron Steve. Casey County had 6 inches, Boyle County had 5 inches and Madison County had 5 inches.

“Moderate flooding is expected along the Kentucky River, and could approach major flood thresholds in some locations,” tweeted National Weather Service (NWS) Louisville.

In Estill County, emergency management officials expect the Kentucky River near Ravenna to crest on Monday. They labeled it as a “historical flood.” According to emergency management, the projected crest was set at 36.9 feet, less than 3 feet higher than the record high. The stage for major flooding in the county is 31 feet.

Here are some scenes across the state showing devastating floods. 

Johnson County Judicial Center in Paintsville has sustained flood damage. 

Mudslides and washed-out roads in Pike County. 

People in Lexington along the Kentucky River are traveling by boat to scoot around town. 

More devastation in Johnson County.

A Twitter user tweeted their area was wiped out by flooding.

Water rescue operations. 

Major flooding between Lexington and Jackson.

A small town is nearly submerged. 

“I gotta say, I have never seen the flooding this bad in this region!” said Twitter user Dahboo7.

I gotta say, I have never seen the flooding this bad in this region! #Kentucky #Weather #Flooding #KentuckyFlooding pic.twitter.com/JOcwOgNLXk

— Dahboo7 (@dahboo7) March 1, 2021

Drone captures flooding along the Red River.