The Biden presidency is officially underway and the agenda they have laid out is no surprise: massive spending, massive deficits, massive tax increases, massive governmental expansion. Historically, such activity would raise investor concerns about distorted incentives, reduction in productivity and stifling of innovation. Throw conventional wisdom out the door; the stock market loves it. Fully in step with the new administration, the Federal Reserve (the "FED") has been outspoken in calling for outsized fiscal spending and Congress has delivered, as evidenced by the staggering spending deficit. Apparently the FED believes direct intervention into the capital markets and growing their $7 trillion balance sheet an additional $120 billion each month is not enough (see Figure 1). 

Year-over-year CPI came in at a paltry 1.7% for February (as reported in March 2021) which seems to be a bit of a disconnect with price changes in major swaths of the economy (see Figure 2). The shortage of semiconductors is grabbing headlines, but supply disruptions are affecting many sectors of the economy. Kimberly Clark, a consumer products global giant, announced they intend to increase prices in the mid to high single digits, yet neither the FED nor the Treasury convey worry.

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