Two things sit at the forefront of the Fed’s mind: inflation and jobs.
Last week we got a look at inflation through the Personal Consumption & Expenditures (PCE), its preferred measure.
And it came in the hottest it has in a very long time.
As we talked about the other week, the Fed doesn’t plan to raise rates, seeing recent price increases as transitory.
They want the economy to ramp up with unemployment down further.
Yet, so far, businesses continue to struggle to hire while the national unemployment rate can’t seem to slip much lower than 6%.
In this week’s report, analysts expect the unemployment rate to dip slightly from 5.8% to 5.7%.
Arguments abound as to why this situation exists.
Some point to the enhanced unemployment benefits keeping folks out of the job market.
And some of the data supports that.
In the 22 states that canceled the enhanced benefits this month, the number of people receiving unemployment is falling faster than others that extended the insurance.
But that only speaks to one part of a complex network of factors working together.
American Airlines canceled hundreds of flights over the weekend due to staffing shortages (6% in fact).
Delta is in the process of hiring 1,300 people for customer service positions.
And last Thanksgiving, Delta canceled more than 300 flights due to pilot shortages.
To lay all this at the feet of unemployment benefits would be incorrect.
Our economy fundamentally shifted from the pandemic. The permanency of any number of changes isn’t clear yet.
Markets continue to climb with S&P 500 price-to-earnings ratio at 45.52x, the highest since the Great Recession and the dotcom bubble.
It’s not a matter of if, but when we see a correction and what that will look like.
To that end, we keep an eye on the major data points, Fed speakers, and stimulus bills for clues to the future.
Our hot take
Markets remain fragile, subject to the data we receive.
Used cars should only see prices increase until they come in line with new cars right?
That’s the theory at least.
What’s interesting is how our TrackstarIQ institutional advisor searches revealed the QQQ ETF beating out the SPY for the first time in a while.
That aligns with the recent rotation we’re seeing in equities.
What will be interesting is to see how that continues as we close out the month.
Questions from your clients
- What big data points are set to influence the market this summer?
- Is the market frothy?
- How do I protect myself from a collapse?
- Which sectors still have some juice left?
Monday, June 28
- 9:00 AM – New York Fed President John Williams speaks at BIS panel
- 12:00 PM- Richmond Fed President Tom Barkin speaks
- 1:00 PM – Fed Vice Chair for Supervision Randal Quarles speaks on cryptocurrencies
Tuesday, June 29
- 9:00 AM – S&P CoreLogic Case-Shiller U.S. home price index (year-over-year)
- 9:30 AM – Richmond Fed President Tom Barkin interviewed
- 10:00 AM – Consumer confidence index
Wednesday, June 30
- 8:00 AM – Atlanta Fed President Raphael Bostic speaks
- 8:15 AM – ADP employment report
- 9:45 AM – Chicago PMI
- 10:00 AM – Pending home sales index
- 1:00 PM – Richmond Fed President Tom Barkin speaks
Thursday, July 1
- 8:30 AM – Jobless claims
- 8:30 AM – May durable goods orders
- 9:45 AM – Markit manufacturing PMI
- 10:00 AM – ISM manufacturing index & construction spending
- 2:00 PM – Atlanta Fed President Raphael Bostic speaks on housing
Friday, July 2
- 8:30 AM – June unemployment report
- 10:00 AM – Factory orders