Markets Retreat as Key Inflation Report Looms
Global equity markets fell slightly after posting a strong rebound the week prior. We saw global markets (represented by the MSCI All Country World Index) down -0.5% and domestic stocks (represented by the S&P 500 Index) down -1.2%.
Consumer Price Index Report
All eyes will be on the Consumer Price Index report this Friday from the U.S. Bureau of Labor Statistics. Inflation is the primary driver of economic concerns and seeing progress in reducing its elevated level will be key in settling markets.
Inflation isn’t just a domestic issue, it’s a global problem. The Eurozone recently announced its inflation rate of 8.1% for May, which exceeded many forecasts.
In labor market news, the economy generated 390,000 jobs in May which kept the unemployment level at 3.6%. That tight labor market is a little bit of a concern for economists, who worry that it’s causing wage growth to rise too quickly. Despite that, the strong employment conditions domestically are an encouraging sign of economic health.
Index of Consumer Sentiment
Another report to be released on Friday is the University of Michigan Index of Consumer Sentiment. This is one economic indicator that has remained low as consumers have clearly been impacted by inflationary concerns. You can see below that sentiment is still considerably below pre-pandemic levels.
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.
S&P 500: The Standard & Poor’s 500 Composite Stock Price Index is a capitalization-weighted index of 500 stocks intended to be a representative sample of leading companies in leading industries within the U.S. economy. Stocks in the Index are chosen for market size, liquidity, and industry group representation.
Russell 2000: The Russell 2000® Index is a capitalization-weighted index designed to measure the performance of the 2,000 smallest publicly traded U.S. companies based on in market capitalization. The Index is a subset of the larger Russell 3000® Index.
MSCI All Country World Index: The MSCI ACWI captures large and mid-cap representation across 23 Developed Markets (DM) and 24 Emerging Markets
(EM) countries. With 2,937 constituents, the index covers approximately 85% of the global investable equity opportunity set.
GDP: Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
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