Chief Economist Scott Brown discusses the latest market data.
The Consumer Price Index rose 0.5% in July (+5.4% y/y, vs. +1.0% y/y in July 2020), up 0.3% ex-food and energy (+3.4% y/y). Prices in many of the areas that had experienced rapid inflation in recent months appeared to be moderate, consistent with the view that much of higher inflation will be transitory (granted, it’s only one month). The Producer Price Index (PPI) rose 1.0% in July (+7.8% y/y), partly reflecting higher margins for motor vehicles. Ex-food, energy and trade services, the PPI rose 0.9% (+6.1% y/y). Import prices rose 0.3% in July, down 0.1% ex-food and fuels.
The University of Michigan’s Consumer Sentiment Index fell sharply in the mid-August reading, reflecting growing concerns about the delta surge. The Chicago Advance Retail Trade Summary (CARTS) data showed a pickup in sales in late July, following some softness in the first half of the month (up modestly relative to June). Job openings rose to another record high in June and the quit rate increased (signs of a strengthening labor market).
Next week, the retail sales report and the FOMC minutes should be the highlights. Retail sales appeared to improve in late July, reflecting healthy back-to-school shopping (often a harbinger of the holiday shopping season), but unit motor vehicle sales were reported lower. (Note: The delta surge is likely to dampen sales in August.) The FOMC minutes should show a difference of opinion about the potential tapering of the Fed’s monthly asset purchases (currently $120 billion per month).
|Last||Last Week||YTD return %|
Consumer Money Rates
|Last||1 year ago|
|Last||1 year ago|
|Dollars per British Pound||1.3827||1.309|
|Dollars per Euro||1.1763||1.181|
|Japanese Yen per Dollar||110.22||106.93|
|Canadian Dollars per Dollar||1.252||1.322|
|Mexican Peso per Dollar||19.868||22.167|
|Last||1 year ago|
|Last||1 month ago|
|10-year municipal (TEY)||1.4||3.04|
Treasury Yield Curve – 08/13/2021
As of close of business 08/12/2021
S&P Sector Performance (YTD) – 08/13/2021
|August 17||—||Retail Sales (July)|
|—||Industrial Production (July)|
|—||Homebuilder Sentiment (August)|
|August 18||—||Building Permits, Housing Starts (July)|
|—||FOMC Minutes (July 27-30)|
|August 19||—||Jobless Claims (week ending August 14)|
|—||Leading Economic Indicators (July)|
|August 25||—||Durable Goods Orders (July)|
|—||CARTS data (mid-August)|
|August 26||—||Real GDP (2Q21, second estimate)|
|August 27||—||Personal Income and Spending (July)|
|September 3||—||Employment Report (August)|
|September 6||—||Labor Day Holiday (markets closed)|
|September 22||—||FOMC Policy Decision|
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 August 12, 2021.
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