06|29|2021

Infrastructure Hopes | June 25, 2021

AUTHOR: Jason J. Roque, MS, CFP®, APMA®, AWMA® TITLE:       Investment Adviser Rep – CCO TAGS:   S&P 500, Earnings, Housing, Jobs, PMI

Markets rose on hopes of an infrastructure compromise. What does it mean for markets and inflation as we look ahead?

Monday

The new week brought optimism. So much so that the markets rebounded more than half the losses from the prior week in one day. All eyes are to Washington, however as Federal Reserve Board (FRB) Chair Powell is set to testify.

Tuesday

FRB Chair Powell’s testimony about inflation rising higher than expected did not sully the mood of markets. The S&P 500 still rose 0.51% on the day. While he acknowledged it rose more than they expected, they won’t be making any rash decisions about increasing rates early.

Wednesday

Markets were fairly unchanged for the day. The S&P 500 fell 7.44 points (0.18%). The new home market continued to cool as purchases fell by 5.9% (May). While construction costs have increased approximately 10% over the last year, new home prices have risen 17%.

Thursday

The market activity was bullish on Thursday with all major indices higher. This move was a forward-looking move as durable goods orders and new unemployment claims missed estimates. An infrastructure deal was agreed upon in principle which brought optimism on spending.

Friday

Consumer sentiment missed estimates. It was expected to rise to 86.4 and came in at 85.5 (June). The softer sentiment could lead to weaker than expected retail spending. It’s becoming more likely that second quarter GDP estimates will miss expectations.

Conclusion

Markets surged back this last week. Not on economic data, as that was weak, but rather the hope brought about from an infrastructure package. If delivered, it should alleviate some of the jobless rate issues plaguing the new expansion. However, it will likely exacerbate some supply line constraints. This will calm some overall inflation concerns while leaving material prices elevated for some time.

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