The Dog Days of Summer are here! In addition to the record heat waves expected to bombard the West Coast this weekend, we also await what typically occurs around this same time: equity market volatility and below average returns.
Summertime Blues
Exit Strategy
A year ago, Federal Reserve Chair Jerome Powell famously said, “We’re not even thinking about thinking about raising rates.” At this week’s Federal Open Market Committee (FOMC) meeting the Fed took its first tangible steps to lay the groundwork for a gradual removal of the stimulus measures enacted last year.
Hot Off The Press
Inflation, fast becoming the most dominant market and economic theme of 2021, has media and market commentators fixated on the topic, this blog included. In fact, this will be our fourth entry covering inflation in the past five weeks. While we apologize for “beating a dead horse,” we would be remiss if we did not provide our readers with further clarification on the subject.
Signs!
“Signs, Signs everywhere there are [help wanted] Signs,” is how the song goes. It’s the first Friday of the month, and that means the monthly payroll report is released by the Bureau of Labor & Statistics.
Easing Into Summer
A quiet week on Wall Street feels like just what the doctor ordered ahead of the long Memorial Day weekend. Stocks remain well bid and within striking distance of new highs ahead of what will be a busier week of economic data.
An Inflation Fixation
Both the financial and popular press have been inundated with headlines on inflation. Last week’s higher than expected Consumer Price Index (CPI) report added fuel to this fire. Given the elevated inflation measures reported the last two months, two questions rise to the fore: 1) Is the inflation we are all seeing temporary or long-lasting, and 2) How and over what timeframe will the Federal Reserve address it.
It Finally Happened...
Last year, when our economy began to emerge from the recession and to reopen, so too did concerns of inflation, even though it was below the Federal Reserve’s target interest rate of 2 percent.
The Writing on the Wall
“Tell me where earnings are going, and I’ll tell you where the markets are going” is common phrase you’ve heard from us over the years.
Inflection Points
Earlier this month in an interview with 60 Minutes, Federal Reserve Chair Jerome Powell indicated he believed the U.S. economy “seems to be at an inflection point” due to widespread vaccinations and previously enacted stimulus measures. He added his expectation that the economy would begin to grow “much more quickly” and that the pace of job creation would accelerate.
Error of the Estimates
First quarter earnings season shifted into high gear this week, transitioning from the big banks to blue chip companies ranging from Procter & Gamble and Johnson & Johnson to Intel and AT&T.
Inflation Bonds
On Tuesday this week, inflation data as measured by the consumer price index (CPI) for the month of March was reported at 2.6 percent. This year-over-year inflation reading was significantly higher than it had been trending over the past few months.
Knowing the Rules
Treasury Secretary Janet Yellen called for a global minimum tax in a speech this week coinciding with the Biden administration’s call for a corporate tax increase. Just like the rules of recess football, it’s not the rate that’s important, it’s the certainty in the rules itself that matter.
The "Yeah, but..." Recovery
Maybe it’s human nature, news coverage or it’s just a self-preservation mechanism, but I’ve decided to start calling this the “yeah, but….” recovery. “The global economy is going to boom in the second half of the year,” say the economists. And then comes, “Yeah, but…’
New Leadership and The Vaccine Pivot
Last November, Pfizer announced a 95 percent efficacy of their COVID-19 vaccine. Since that time, there has been a notable shift in leadership within the stock market.
Panic Attack
Twelve months ago, investors were in a state of sheer panic as they were witnessing stocks freefall by over 30 percent.
The COVID Pandemic Turns One
This week marks the one-year anniversary of the World Health Organization declaring the COVID-19 virus a pandemic. Since then, we have seen the largest economy in the world locked down, a massive spike in unemployment and the shortest economic recession on record, quickly followed by double-digit GDP growth.
Statement of Confidence
Federal Reserve Chairman Jerome Powell in testimony to Congress last week said that the increase in Treasury bond yields is a "statement of confidence" in a robust economic outlook.
Changing of the Guard
Federal Reserve Chairman Jay Powell briefed lawmakers this week on the state of monetary policy, assuring members of Congress that the central bank has no intention of raising interest rates anytime soon.
Inflation and the Recovery
Inflation expectations are rising. Next month, we begin to lap the extraordinarily low inflation measured last year when the pandemic triggered a dramatic reduction of demand for both goods and services globally. Upcoming reports may be elevated when compared to last year’s weak results and we may see 3 to 4 percent increases in inflation this spring.
