Holding the Economy at Bay | July 30, 2021

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA®
TITLE:       Investment Adviser Rep – CCO
TAGS:   S&P 500, Stagflation, Debt Ceiling, Jobs

Markets were little changed last week, but the economic calendar was not light. What’s holding markets at bay?


Markets gained on Monday as the week got underway. The move was broadly bullish. We saw safe haven assets retreat while risk assets gained a bid. This rise on Monday led to record closes for many indices. While bullish, gains were meager as markets await the results of the Federal Reserve Board (FRB) meeting later this week.


The red-hot housing market continues to gain value as home prices rose 18% over the last 12 months. Markets pulled back from their record highs on Tuesday as durable goods orders missed expectations. On a positive note, the CB consumer confidence measure remained high at 129.1. It was expected to fall to 123.9.


Markets struggled to find their north early as they awaited the results of the FRB meeting. Nothing changed after the FRB meeting was over. The S&P 500 was little changed on the day. The Russell 2000 gained 1.5% on the day, however.


Investor sentiment was buoyant on Thursday as markets rose. They did so on news that US GDP rose 6.5% for the second quarter. That gives us two consecutive quarters with GDP in excess of 6%! Additionally, new jobless claims fell to 400K.


Markets gave back the gains from Thursday and ended lower on the week. The S&P 500 lost appx .3% for the week on news that inflation pressures are persisting.


The rise in GDP and inflation creates a recipe (at the surface) of sooner than anticipated rate hikes from the FRB–a decision which would tamp down growth and subsequently, inflation. The FRB is acutely focused on the longevity associated with current inflation, which they view as temporary. Should it persist beyond the next several months, we may see rate increases sooner than desired.

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