Battle for Market Leadership Ongoing, Stronger than Expected Jobs Report, and Post WWII Inflation Episodes
August 9, 2021 | FIRESIDE CHARTS
The U.S. is still on the road to recovery and the battle for market leadership shows how bumpy that road has been. However, both the S&P 500® Index and Dow Jones Industrial Average closed at record highs last week after a stronger than expected jobs report. More records are being broken in equities as well—share buybacks are near 2018’s record and operating margins are at their highest levels as price increases are being passed through to consumers. Transporting commodities continue to run into problems as U.S. freight rail traffic dipped below its multi-year range. As the Delta Variant still rages, and with the U.S. back to reporting more than 100,000 Covid cases a day, what conclusions can we draw regarding the status of inflation and this recovery? Does looking at the historical episodes of U.S. inflation post-WWII and their catalysts give us an inkling?
- The market leadership battle has been intense from the beginning of the pandemic:
Source: Morningstar, as of 7/31/21
2. With Consumer Staples being the only sector to retreat, it was another week of new highs:
Source: The Chart Store, from 8/9/21
3. Certainly, the PPI price increases have been able to be passed through:
Source: S&P Dow Jones Indices, from 8/9/21
4. Dividends continue to take a back seat to buybacks despite the low yields in bonds:
Source: Goldman Sachs, Bloomberg, from 8/9/21
5. Is the Fed itself helping to reduce interest rates before they start their taper?
Source: The Chart Store, from 8/9/21
6. Friday’s strong jobs report brought the unemployment rate down to 5.39%:
Source: The Chart Store, from 8/9/21
7. One of the reasons transports are lagging:
Source: Deutsche Bank, from 8/9/21
8. Careful what you wish for!
Source: Federal Reserve Economics Data, from 8/9/21
9. Covid, especially the Delta variant, does not care about age, politics, religion, or even freedoms. It wants to reproduce and needs unvaccinated people to thrive. Th U.S. is back above 100,000 new cases a day:
Source: CDC, Deutsche Bank, from 8/9/21
Disclosure: The charts and infographics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be held in client accounts. Past performance is no guarantee of future results.