Stocks ended the week mixed as investors appeared to shrug off a hotter-than-expected inflation report.
The Dow Jones Industrial Average slipped 0.80%, while the Standard & Poor’s 500 advanced 0.41%. The Nasdaq Composite index led, tacking on 1.85%. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.31%.1,2,3
My Outlook remains bullish (optimistic) although significantly muted from where it was earlier this year now that we have seen significant gains. As regular readers of my blog know, the probability that the remainder of the Biden agenda (which will, if passed, further stimulate growth) will get passed by the Senate has declined, and the Fed has started talking about talking about tapering it's stimulative bond-buying program.
The total return YTD on the S&P 600 (an index of the 600 smallest stocks in S&P's 1,500 stock total market index) is 24.49%, nearly doubling the return of the large-cap S&P 500 over that time (https://www.marketwatch.com/investing/index/sml June 14, 2021). You may remember at the beginning of the year I talked about the rotation to cyclical stocks, other media outlets predicted superior returns could be had with "value" investing and others favored small-cap stocks. Most of the time there is not much that we feel strongly enough about to adjust our long term asset allocations, but for small-caps, we can say that was one prediction that has turned out to be useful.
Another Quiet Week
The market traded in a narrow range for much of last week as investors anxiously awaited the release of the Consumer Price Index (CPI) on Thursday.
May’s CPI saw an increase in inflation that exceeded most expectations. Paradoxically, markets advanced on the news, sending the S&P 500 to a new record close and the technology-heavy NASDAQ Composite higher. Perhaps equally unexpected was the decline in the 10-year Treasury yield, which slipped to 1.45%, touching its lowest level in three months.4
On Friday, stocks were unable to materially build on the previous day’s advance, though the S&P 500 managed to add onto its record Thursday close.
Consumer prices headed higher in May, rising 0.6% from April and by 5.0% from a year ago. It was the largest jump in the CPI since August 2008. Core inflation, which excludes food and energy prices, rose 3.8% — the sharpest increase in nearly three decades.5
Automobile prices were one of the primary contributors to May’s number. Used car and truck prices jumped 7.3% month-over-month and by 29.7% from a year ago. New cars experienced their highest monthly increase since October 2009 as a result of an inventory shortage stemming from tightness in the semiconductor supply.6
This Week: Key Economic Data
Tuesday: Retail Sales. Industrial Production.
Wednesday: FOMC (Federal Open Market Committee) Announcement.
Thursday: Index of Leading Economic Indicators. Jobless Claims.
Source: Econoday, June 11, 2021
This Week: Companies Reporting Earnings
Tuesday: Oracle Corporation (ORCL).
Thursday: The Kroger Co. (KR).
Source: Zacks, June 11, 2021
“One loyal friend is worth ten thousand relatives.”
Tax Tips for Children or Grandchildren with Part-Time Summer Jobs
As summer approaches, many of us have kids or grandkids who are coming home for the summer and working part-time. Whether they're bussing tables, counseling summer camp, or mowing lawns, these tips will help them (and you) understand the tax implications of summer jobs:
Summer jobs are a great way to learn about responsibility and taxes, as well as earn a little extra income before returning to the school year.
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov7
How to Take a Vacation Without Leaving Home
Vacations provide a ton of benefits and are a great way to relax and take a break from your everyday stressors. But sometimes, you can't swing a whole vacation. The good news is that you can still enjoy a little getaway without leaving the comfort of your own home.
Here are some fun ways to "get away" without actually getting away:
Whether you want to visit a national park, learn a new language, or try a new recipe, there are countless ways to explore the world from your living room.
Tip adapted from Ideas.ted.com8
What common English word has three consecutive double letters?
Last week’s riddle: I have cities, but no houses. I have mountains, but no trees. I have water, but no fish. What am I? Answer: A map.
Kelp forest, Monterey, California.
Footnotes and Sources
2. The Wall Street Journal, June 11, 2021
3. The Wall Street Journal, June 11, 2021
4. The Wall Street Journal, June 11, 2021
5. CNBC, June 10, 2021
6. CNBC, June 10, 2021
7. IRS.gov, June 28, 2019
8. Ideas.ted.com, Oct 26, 2020
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Weekly Market Insights: Stocks Stay Cool, Inflation Heats Up
June 14, 2021