Markets “In a Nutshell” for July 19, 2021
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 0.50%, the S&P 500 was down 1.00%, and the NASDAQ fell 1.90%. Foreign stocks (MSCI EAFE) were down as well, falling 0.10%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 1.30%. (Data source: Wall Street Journal)
Inflation Comes in Hotter Than Expected
For the fourth month in a row inflation data came in higher than expected. CPI showed inflation rose 5.4% year over year and Core CPI, which excludes food and energy, rose 4.5%. This is the highest Core CPI number since 1991. Pent-up demand for travel is causing prices in the travel industry to surge as people look to start traveling more and more as we move through the Pandemic. Another area where prices are rising is the used car market, as the market for new cars becomes tightened as the chip shortage continues. Used care prices rose the most they have since the data started being recorded in 1953. Although these areas only make up 10% of CPI, they accounted for 60% of the rise in the index. This shows inflation is not everywhere yet and may be transitory but inflation is starting to become more widespread as employer’s increase wages to get people back to work.
Powell Holds Stance on Economy
Fed Chair Jerome Powell appeared in front of Congress on Wednesday for his semi-annual testimony on monetary policy. Powell stood strong on his belief that the inflation we are currently seeing is transitory and we are still a ways off until the Fed begins to taper asset purchases. Powell’s comments continue to be favorable toward the market as he commits to his plan of continuing to purchase assets and keep rates unchanged for the next year or two. If the Fed’s stance on these issues change, there may be some volatility in the market but so far the Fed has committed to signal when their position will change so the market will know when to expect these changes.
When did Jerome Powell take over as the Federal Reserve Chairman? (Scroll Down for Answer)
Have a Great Week!
3. 2018, Jerome Powell was appointed to the board of the Fed in 2012 by President Obama and was appointed the Chair in 2018 by President Trump