Thought of the Week / June 10, 2021
May 2021 Market Recap:
o SP 500 performance: 0.50%
o Dow Jones Industrial Average: 1.90%
o Nasdaq: -1.5%
o iShares Core U.S. Aggregate Bond ETF: 0.20%
Market Recap Source
Events this Months:
Federal Reserve Announcement – June 2
The federal reserve announced on Wednesday that they are going to start selling part of their corporate bond portfolio “gradually and orderly.” While they didn’t hold an incredibly high amount of corporate debt (approximately $13.8 Billion compared to a corporate bond market of over $10 Trillion) this is the first step toward tightening monetary policy they have taken since the pandemic. Their next meeting on June 15-16 (below) will provide key insight into whether they plan to expand this decision to other areas of monetary policy in the near future.
May Job Report Released – Today, June 4
The May jobs report came in with lower than expected numbers (559,000 actual vs. 650,000 expected). The unemployment rate declined to 5.8%, which is the lowest it has been since May 2020. Had the jobs report came in “too hot” (better than expected) the market could have pulled back due to inflationary fears. Thus far the SP 500, Dow Jones Industrial Average and the NASDAQ are all in the green as of 3:45pm Friday, June 4th.
May 2021 CPI-U Release (Inflation for May) – June 10
The Consumer Price Index (CPI) numbers are set to be released on June 10th. The CPI examines the weighted average of prices consumer goods and services, such as transportation, food, and medical care, and averages them. This release will be another key number to look at prior to the June Federal Open Market Committee (FOMC) meeting, and will likely determine the direction of the conversations for the meeting.
Federal Open Market Committee (FOMC) Meeting – June 15 & 16
The Fed will meet again in less that two weeks. So far, the Fed has maintained the position that monetary policy will remain easy until they feel that the economy is fully healed. They are also adamant that the higher inflation numbers are temporary, and will begin to subside once the economy has fully recovered. A change in attitude by the Fed could lead to a pullback in stock prices. At this meeting, we will see if they believe it is time to begin tightening monetary supply.
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