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- Stocks were down across the board last week. We saw global markets (represented by the MSCI All Country World Index) down -1.5% and domestic stocks (represented by the S&P 500 Index) down -1.4%. In the U.S., we saw the NASDAQ Index once again lag as the technology and consumer discretionary sectors struggled. Leading the pack was developed international stocks, which were down -1.3% for the week.
- The highlight of the week was the report that consumer prices rose the most in any 12-month period since the downturn in 2008. The Consumer Price Index, or CPI, rose 4.2% from a year earlier. This is the spike the Federal Reserve believes will be short-term.
- Speaking of the Federal Reserve, they have remained focused on keeping rates low. On Thursday, a member of the governing board stated that discussions on raising rates won’t start until consecutive months of improving jobs and rising inflation.
- As earnings season comes to an end, it appears that the final growth rate on earnings for Q1 2021 over Q1 2020 will be approximately 50%. This would be one of the biggest earnings growth quarters in over a decade.
- After a 10.7% rise in March, U.S. retail sales flattened in April.
- With inflation driving so much of the conversation today, I think it’s worth reviewing what pushes prices higher. Part of the issue is base effect, meaning prices dropped so much in April and May last year and are being compared to a low starting number. Additionally, basic supply and demand forces are at play. With supply chain issues, many industries are facing supply constraints. As the economy reopens, there is a substantial amount of pent-up demand. For example, prices in airfare, hotels, and car rentals were up indicating a recovery in the travel industry.
- I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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