August 1, 2021
Although the economic recovery continues, the pace is definitely slowing. Employment statistics are at a level that would have been considered very unsatisfactory before the pandemic with the unemployment rate being 5.9% with a labor force participation rate of 61.6% versus pre-pandemic numbers of 4% and 63% participation. The hope is that as incentives diminish businesses will get staffed up again.
The increase in oil and gas prices has impacted the consumer twice, immediately through fuel bills and then slowly through retail price increases. Although both copper and lumber prices have seen meaningful declines recently, prices remain at historic highs. Which leads us to the housing market. Although house prices have recently flinched, the rapid rise in appreciation has led 60% of consumers to think that it is now a bad time to buy a house, according to a recent survey. We would be cautious on investing in housing as a speculation.
Even through July, with a slight hiccup mid-month, the stock market continues to gain which is consistent with very low interest rates. Stocks over the long term have the added inflation hedge over bonds. We believe inflation will be a factor going forward despite the “transitory inflation” discussion in the media. Generally, inflation is felt first in the supply chain with manufacturers increasing prices to maintain margins and this time around may also be felt in labor shortages. Still, in the short-term stocks will tend to react quickly and with volatility to unexpected events.
Again, we encourage you to advise us of any critical cash needs that you anticipate over the next 6 to 12 months. Market highs are always a great time to raise cash versus times of market corrections. We continue to rebalance accounts to maintain an allocation that suits each client’s particular situation.
Year to date, the Dow, S&P 500, and NASDAQ were all ahead at 14.14%, 17.02% and 13.85%, respectively, while the 10-year Treasury is currently yielding 1.226%.
*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.