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Market Commentary

May Monthly Market Commentary

Focus on the Trend, Not the Noise


The economic environment is ripe for naïve and misguided narratives. Taken at face value, the latest reports on jobs, consumer prices and retail sales suggest that the U.S. is in the grips of a jobless recovery and a stalling economy that is weighed down by worrisome inflationary pressures. This assessment on the economy is not only wrong; it is also risky, as it could lead to self-fulfilling prophecies. For one, the weak employment report for April doesn’t mean the job recovery has stalled – it’s simply taking a breather.

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April Monthly Market Commentary

A Jobs Boom is Near, But Not Full Employment


The well-telegraphed heat wave in economic activity is underway. Most key economic data for March exceeded expectations, punctuating a quarter that turned out to be considerably stronger than anyone predicted earlier in the period. Importantly, the mercury is poised to turn hotter in the second quarter, thanks to another round of government stimulus and the accelerated pace of vaccinations that is bringing the pandemic closer to an endgame. Health officials in the U.S. now expect herd immunity, wherein 70-80 percent of the population receives a shot in the arm, to be reached sometime mid-year. That’s about three months earlier than these experts were predicting a few months ago.

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Weekly Market Commentary

June 14, 2021


The heated debate over whether inflation is running amok or taking brief fling got even hotter this week. Clearly, inflation alarmists were buoyed by the latest consumer price report, which revealed an inflation rate that is both accelerating and running well ahead of expectations. The outsized 0.6 percent increase in consumer prices reported for May followed an eye-opening 0.7 percent increase in April and lifted the annual rate to a 13-year high of 5.0 percent from 4.2 percent the previous month. While the inflation pick-up was widely expected, it exceeded most forecast and is luring more commentators into the hawkish camp, arguing that the Federal Reserve needs to start unwinding its turbo-charged easy policy sooner rather than later lest it falls further behind the inflation curve.

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Weekly Market Commentary

June 7, 2021


The search for answers didn’t get any easier on Friday after the Labor Department released its monthly jobs report. While the key takeaway is that job growth in May was disappointing, the headline reading leaves a host of questions still unanswered. Topping the list is whether the weaker-than-expected showing reflects labor shortages, confirming widespread anecdotal reports that businesses can’t find workers to fill open positions. If so, the question is why. There are still 7.6 million fewer workers drawing paychecks than there were just prior to the pandemic. How many in this vast pool of workers are remaining on the sidelines voluntarily – for health reasons, family responsibilities, such as childcare, or because generous unemployment benefits make job openings less attractive? Alternatively, how much of the shortfall is involuntary, reflecting a mismatch between the type of skills needed by businesses and the skills of unemployed workers.

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Weekly Market Commentary

June 1, 2021


The U.S. economy closed out the month of May riding a host of mixed feelings. Companies are upbeat, households are cautiously optimistic and investors are grateful for past gains, but anxious over future policy decisions. As the weather heats up over the summer months, so too will activity, which should generate warmer feelings all around. The emotional relief derived from the fading of the pandemic is imparting a jolt of energy into the economy. People are eager to resume dining out, going to museums, booking travel plans and attending sporting events. Flush with cash from generous government transfer payments, the itch to reconnect with friends, family and society in general should underpin the economy’s stellar performance in coming months.

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Weekly Market Commentary

May 24, 2021


You could hardly call it a pivot, much less a U-turn, but the Federal Reserve has added a bit more nuance to its policy stance, a shading that has thrown commentators into a speculative frenzy this week. The springboard for all the fuss was the release of the minutes from the April 27-28 policy meeting. If you recall, the summary statement delivered after that confab highlighted the Fed’s firm commitment to keep its foot on the monetary pedal for the foreseeable future, meaning that rates would remain at near zero and bond purchases would remain at current levels until the labor market reaches maximum and inclusive employment and inflation rises to two percent for a period of time.

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Weekly Market Commentary

May 17, 2021


The specter of inflation is once again rearing its head and garnering most of the attention in the financial markets. To be sure, it’s not as if its noisy entrance came out of the blue. For months, the economic community and policymakers have been warning anyone within earshot that price increases would accelerate as the economy reopens and unleashes a tidal wave of pent-up demand that overwhelms supply. Against this mighty demand backdrop, fueled by massive fiscal stimulus, companies are able to restore prices that had been deeply cut during the worst of the pandemic, and muster enough power to pass higher labor and input costs on to consumers.

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Weekly Market Commentary

May 10, 2021


A month ago, when the Labor Department reported an outsized increase of nearly one million jobs in March, Fed Chair Powell was barraged with questions as to whether it was nearing the time to tap on the monetary brakes. Powell responded in the negative, noting that it would take more than “one great report” to absorb the considerable slack that still remained in the labor force. Despite growing unease in some quarters with his call for patience, the Fed chair has to feel somewhat vindicated following this Friday’s jobs report for April. As it turns out, that “great report” was not so great after all, as the March increase was revised down from 916,000 to 770,000. More to the point, the April report is now being dubbed “the great miss,” as the 266,000 increase in payrolls came in woefully below the consensus forecast of a one million gain. That 844,000 shortfall is one of the largest downside misses ever.

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Weekly Market Commentary

May 3, 2021


The goals of the nation’s policy makers and the means of accomplishing them were in full view this week, with the president presenting his case for another blockbuster economic package before a joint session of Congress and the Federal Reserve providing its latest missive on monetary policy. Neither struck a particularly surprising or discordant note in the financial markets, as the S&P 500 ended the week virtually unchanged from the previous week and bond yields moved just slightly higher. Investors also digested a busy calendar of economic reports, which were mostly upbeat as expected.

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