Chief Economist Scott Brown discusses the latest market data.
Fed Chair Powell testified that inflation is expected to drop back to the long-term 2% goal as transitory supply effects abate – nothing new, but that may have left stock market participants with less anxiety than the week before.
Real GDP rose at a 6.4% annual rate in the third estimate for 1Q21, same as in both the advance and second estimates (annual benchmark revisions are due next month). Other data pointed to continued strength in 2Q21, but some moderation in the pace of growth heading into the second half of the year. Consumer spending was flat in May, down 0.4% adjusting for inflation, but that followed large gains in March (+5.0%) and April (+0.9%). Shipments of nondefense capital goods ex-aircraft rose 0.9% in May, tracking at more than a 9% annual rate in 2Q21. New and existing home sales both fell in May, reflecting supply constraints and affordability issues. The University of Michigan’s consumer sentiment survey showed reduced inflation expectations, as respondents believe that the recent increase in inflation will be transitory. The report also suggested that consumers may maintain a higher level of precautionary funds and not spend out of the buildup in household savings.
Next week, fresh figures for June arrive ahead of a three-day holiday weekend. The focus will likely be on the Employment Report. Nonfarm payrolls are expected to post a strong gain (around 550,000 ± 200,000), but seasonal adjustment (the end of the school year) could be an issue. Note that prior to seasonal adjustment (and before the pandemic), we would normally lose around 900,000 education jobs and add over 1.5 million non-education jobs each June.
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.3922||1.242|
|Dollars per Euro||1.1932||1.122|
|Japanese Yen per Dollar||132.28||120.25|
|Canadian Dollars per Dollar||1.232||1.364|
|Mexican Peso per Dollar||19.859||22.660|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.569||1.492|
Treasury Yield Curve – 06/25/2021
As of close of business 06/24/2021
S&P Sector Performance (YTD) – 06/25/2021
|June 29||—||CB Consumer Confidence (June)|
|June 30||—||ADP Payroll Estimate (June)|
|—||Chicago Business Barometer (June)|
|July 1||—||Jobless Claims (week ending June 26)|
|—||ISM Manufacturing Index (June)|
|July 2||—||Employment Report (June)|
|—||Trade Balance (May)|
|—||Factory Orders (May)|
|July 5||—||Independence Day Holiday, obs. (markets closed)|
All expressions of opinion reflect the judgment of the author 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 June 24, 2021.
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