Chief Economist Scott Brown discusses the latest market data.
Real gross domestic product (GDP) rose at a 6.4% annual rate in the second estimate for the first quarter, same as in the advance estimate. However, key components (i.e., consumer spending, business fixed investment, residential investment) were each revised higher (inventories subtracted 2.8 percentage points from headline GDP and net exports subtracted 1.2 percentage points). Personal income fell 13.1% in April, reflecting a pullback following government stimulus checks in March. Spending rose 0.5%, with strength in motor vehicles. Increased spending on consumer services were offset by declines in nondurables and non-auto durables. The Chicago Business Barometer was blisteringly strong. Jobless claims continued to decline. Durable goods orders fell in April, reflecting a drop in motor vehicles (related to the semiconductor shortage), but were strong otherwise.
The PCE Price Index, the Federal Reserve’s chief inflation gauge, rose 0.6% (+3.6% year over year), up 0.7% ex-food and energy (+3.1% y/y). The increase reflected higher prices of motor vehicles, a rebound from the low levels of a year ago (the PCE Price Index rose 0.5% y/y in April 2020), and re-start pressures (production bottlenecks and materials shortages, which are expected to be transitory).
Next week, the ISM surveys should remain consistent with a strengthening economy. We should see a strong gain in nonfarm payrolls (500,000 to 1,000,000), with a decline in the unemployment rate. Seasonal adjustment may add noise – so investors should focus on the three-month average payroll gain.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.4152||1.232|
|Dollars per Euro||1.2144||1.108|
|Japanese Yen per Dollar||133.68||119.24|
|Canadian Dollars per Dollar||1.212||1.376|
|Mexican Peso per Dollar||19.998||22.201|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.49||1.492|
Treasury Yield Curve – 05/28/2021
As of close of business 05/27/2021
S&P Sector Performance (YTD) – 05/28/2021
|May 31||—||Memorial Day (markets closed)|
|June 1||—||ISM Manufacturing Index (May)|
|June 2||—||Fed Beige Book|
|June 3||—||ADP Payroll Estimate|
|—||Jobless Claims (week ending May 29)|
|—||ISM Services Index (May)|
|June 4||—||Employment Report (May)|
|—||Factory Orders (April)|
|June 10||—||Consumer Price Index (May)|
|June 15||—||Retail Sales (May)|
|—||Industrial Production (May)|
|June 16||—||FOMC Policy Decision|
|July 28||—||FOMC Policy Decision|
All expressions of opinion reflect the judgment of the Research Department of Raymond James & Associates, Inc. and are subject to change. There is no assurance any of the forecasts mentioned will occur or that any trends mentioned will continue in the future. Investing involves risks including the possible loss of capital. Past performance is not a guarantee of future results. International investing is subject to additional risks such as currency fluctuations, different financial accounting standards by country, and possible political and economic risks, which may be greater in emerging markets. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, and state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Municipal bonds may be subject to capital gains taxes if sold or redeemed at a profit. Taxable Equivalent Yield (TEY) assumes a 35% tax rate.
The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. The Russell 2000 index is an unmanaged index of small cap securities which generally involve greater risks. An investment cannot be made directly in these indexes. The performance noted does not include fees or charges, which would reduce an investor’s returns. U.S. government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The federal funds rate (“Fed Funds”) is the interest rate at which banks and credit unions lend reserve balances to other depository institutions overnight. The prime rate is the underlying index for most credit cards, home equity loans and lines of credit, auto loans, and personal loans. Material prepared by Raymond James for use by financial advisors. Data source: Bloomberg, as of close of business May 27, 2021.