Rising Demand
Mid-Year Update
Both the stock and bond market have had a great first half of the year. With the re-opening economy, declining interest rates, and continued stimulus, there is significant pent-up demand leading to robust consumer spending. This has led to strong corporate earnings, declining unemployment, and substantial demand for consumer goods.
Unfortunately, it has also led to inflation and concern about the economy’s ability to meet the rising demand. Global supply chain issues have led to a number of shortages in a variety of sectors as diverse as lumber and microchips. This has sent the price of everything from dishwashers, cars, and computers to housing, furniture, and kitchen cabinets notably higher. Food prices have risen, and with more people commuting back to work or going on vacation, the price at the pump is also elevated. Additionally, there is a shortage of workers, especially in the areas of hospitality, which is leading to wage pressure on a variety of fronts.
The fed has argued that the inflation is “transitory” and related to the accelerated re-opening. They have reiterated their goal to keep interest rates low and money flowing freely. There are those that disagree and warn that if inflation is persistent and the fed doesn’t do something about it now, they may be backed into a corner of having to tighten the money supply quicker than they would have liked in order to combat runaway inflation. Time will tell.
On top of the abundant economic news, our very dividend congress has budget reconciliation and legislative bills coming up which could result in additional stimulus through the infrastructure bill, policy changes such as increasing the capital gains tax on high earners, and changes to how federal student loans are repaid.
I continue to be cautiously optimistic for the second half of the year . Equities and hard assets have historically been good asset classes during low interest rate and higher inflation time periods. However, the already stretched valuation of the market and concern about Fed interest rate policy make equities susceptible to increased volatility and pull backs. We will continue to monitor economic data as well as government policy and legislation for any impact to our clients.
Last but not least, GO BUCKS!
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The information given herein is taken from source that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities, LLC, dba Independent Financial Partners (IFP), and its advisors believe to be reliable, but is not guaranteed by us as to accuracy or completeness. This is for information purposes only and in no event should be construed as an offer to sell or solicitation or an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. This report may not be reproduced, distributed, or published by any person for any purpose without IFP's express prior written consent.