Markets, Earnings, and Inflation Thoughts

Stocks crawled higher with the major indexes increasing over 1%.  For the week, the Dow rose 1.12%, the S&P 500 1.66%, the Nasdaq Composite 1.33% and the Russell 2000 1.14%.

Foreign stocks and Emerging Market stocks rose .63% and .75% respectively.

Bond yields ended the week with a yield on the 10 Year US Treasury @ 1.65%.  The high for the year, at the end of March was 1.75%.  That a good level to watch!

131 S&P-500 companies will report earnings this week, which much attention to Apple, Alphabet, Amazon, Facebook and Microsoft.  So far in this reporting season, earnings have been great, with rising costs hurting margins only incrementally.

Inflation Thoughts

Prices have soared for many products and services.  Homes, automobiles, gas, food, restaurants, you name it…… it all costs more!

The pace of increase will need to moderate for our economy to operate constructively.

Let’s take a short look back: the stimulus packages, 3 of them, added significant funds to most checkbooks.  For months, we were not permitted to go out & spend, other than the supermarket and drug store.  A ton of money was saved!  A combination of funds still being earned at work (for those that worked through the pandemic), stimulus checks, additional unemployment benefits, and now rising wages.

So, there has been record levels of money in consumer hands.  What happens? It gets spent! That’s the American Way!

Supply issues first started with the beginning of Covid, with many goods-producing countries shutting down manufacturing.  Manufacturing overseas is still not where it was pre-pandemic, so there are less goods coming over.  When the goods are finally shipped to the US, there are many bottlenecks that are limiting the goods from getting ashore, and transportation costs have soared.

Let’s fast forward to July 1, 2022…..  Roughly 9 full months from now. I’m thinking the supply chain issues should have moderated, however I don’t believe we’ll be at 100%.

Combine the assumed supply chain moderation, with consumers not receiving additional stimulus checks & the Fed reducing monetary stimulus.  Costs should stop increasing at the current pace.  I don’t think prices will fall back, just a more normal rate of inflation going forward.

I do expect the next year or so to be challenging.  Between rates, inflation, the Fed, Government spending plans and of course, next November’s mid-term elections, we should expect a bit of uncertainly.

Looking beyond then, I believe there will be a much greater number of sunny days! 

As always, its extremely important to make sure your investment portfolio is appropriate for your current stage of life, needs for income today, and needs for income in the future. 

For nonclients; its always a good idea to have a qualified set of eyes review your portfolio and planning needs.  To schedule a consultation, please click here! 

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