Jobs data was strong in July, showing continued healing in the U.S. labor market. Strong jobs data pushes the Fed to make a call on tapering, but it will likely try to hold off until the Fall when the backdrop is more “normal.”
We are almost two-thirds of the way through earnings season (60% of S&P 500 companies have reported) and there are a few important takeaways. First, earnings are coming in better than expectations.
We are not going to go out of our depth to provide thorough country assessments, but instead, look at what the broad make-up of the indices and their relative performance can tell us about the future prospects of these non-U.S. markets.
Many prognosticators think the bond market is reacting to just the technical/positioning driver, but we think it is a mixture of positioning, peak data, and preemptive fed.
It is clear that the one-time impacts from the shocks of shut-down and reopening will dissipate in the coming months. The base effect tailwind of easy comparisons from 2020 becomes a headwind of tough comparisons next year when comparing to 2021.
The S&P 500 had its 33rd day in 2021 closing at an all-time high last week, though, since April, a declining number of stocks have been joining in on the new-high party.
Some assets are indicating rising deflation risks, while other asset prices are indicating a continuation of the cyclical, reflation trade.
When incorporating new information into a stock price, like an earnings release, there are three components to consider: the fundamentals, the expectations and the positioning.
The big question is: will the sharp price increases that consumers and businesses are experiencing today cause them to expect higher prices in the future?
Leading up to Friday’s jobs data release the narrative was clear: the combination of a rapid vaccine roll-out and reopening of the economy was going to create a tidal wave of hiring as people returned to work.
All signs point to a continued surge in demand for goods, and a long-awaited recovery in demand for services. As the Oracle of Omaha, Warren Buffet, shared this weekend, the U.S. economy is “red hot”.
We are going to focus today’s discussions on how policy changes can impact markets and leave the discussion about individual tax and wealth planning to our very own Nick Bertha, Head of Wealth and Trust Planning.