Weekly Commentary: Week of June 14

THE WEEK IN REVIEW: June 6 - June 12

Climbing to new heights

The S&P 500 hit a new record high last week, while the Nasdaq saw a weekly gain for the fourth week in a row. What factors are pushing markets upward? For one, the consumer sentiment report showed Americans expect prices to rise 4% in the coming year. That's actually good news, because last month's reading said consumers expected a jump of 4.6% in prices. The report also pointed to signs that consumers are growing more confident about where things are headed with our economy.

Also last week, a bipartisan group in the Senate reached a deal on an infrastructure plan. The deal would not raise corporate taxes, as the Biden administration had proposed, but would include $762 billion in new spending. That's way less than the $2 trillion the White House had originally requested. Will President Joe Biden and Democratic leaders in Congress agree to the scaled-back plan? We shall see.

While markets climb, question marks around interest rates and inflation continue to dominate the conversation. The yield on the benchmark 10-year U.S. Treasury note decreased to its lowest levels since early March of this year, pushed lower following statements from Federal Reserve members that they intend to keep monetary policy highly accommodative for "some time." They also indicated that they see the recent spike in inflation as temporary.

Even if the inflation is temporary, it still feels painful right now. The overall price of food and shelter has increased 2.2% since May 2020, which is within the Fed's 2% average inflation target. But Americans are feeling pinched in other ways, especially related to anything travel. Gas prices are up 56.2% and airline prices have increased 24.1%. In the market for a car? Good luck; prices on used cars and trucks are up 29.7%. Even renting a car will cost you 109.8% more! Keep in mind that these increases are year- over-year. Last May, most Americans weren't going anywhere – causing demand (and prices) to plummet. If you compare the current gasoline prices with what they were in May 2019, they're only 3.4% higher. The numbers are somewhat skewed due to last year's unnaturally low demand.

Sure, the Fed says inflation is temporary, but how long can "temporary" really be? Supply chains are unable to keep up with demand, as we've seen with the construction industry and the price of lumber. And a wave of Covid-19 cases in Asia is creating new bottlenecks in the supply chain, especially for semiconductors and chips. That increase in auto prices I talked about earlier? Much of it is likely due to a lack of chips for new car production. (Anyone miss the days of non-smart cars?)

In the midst of all the inflation talk, there was good news last week. Initial unemployment claims continue to drop, coming in at 376,000 last week, the lowest level since March 14, 2020 (about the time the world shut down). That's six straight weeks of declines, in case you're playing along at home.

Black gold ... Texas tea

Will oil reach $100 a barrel? Traders think it could by the end of 2022. They've scooped up call options tied to Brent and West Texas Intermediate crude oil prices. Right now, oil prices are well on their way; they hit $70.93/ppb last week. The last time they were over $100: July 2014.

Coming this week

• How's the housing market really doing? We'll see some hard numbers this week, with the home builders' index on Tuesday plus building permits and housing starts on Wednesday.
  

• The Fed meets mid-week, and Chairman Jerome Powell is scheduled to make his regular post- meeting remarks on Wednesday. Markets will react decisively to any comments indicating the Fed sees inflation as less "temporary" than originally thought.
  

• Could we see a drop in initial unemployment claims for seven weeks in a row? We'll find out on Thursday. The forecast is currently for 376,000, essentially flat from last week's numbers.

Have a great week!
Tom Siomades, CFA®
Chief Investment Officer
AE Wealth Management

Investment advisory services offered through AE Wealth Management, LLC (AEWM). AEWM and Sears Wealth Management & Insurance Solutions are not affiliated companies.

We are an independent financial services firm that creates retirement strategies using a variety of investment and insurance products. Neither the firm nor its representatives may give tax or legal advice. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

It is important that you do not use email to request, authorize or effect the purchase or sale of any security, to send fund transfer instructions, or to effect any other transactions. Any such request, orders, or instructions that you send will not be accepted and will not be processed. The text of this communication is confidential, and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Recipients should be aware that all emails exchanged with the sender are automatically archived and may be accessed at any time by duly authorized persons and may be produced to other parties, including public authorities, in compliance with applicable laws.

Sears Wealth Management is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC. The advisory firm providing you this report is an independent financial services firm and is not an affiliate company of AE Wealth Management, LLC.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information and opinions contained herein, provided by third parties, have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by AE Wealth Management.

This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. None of the information contained herein shall constitute an offer to sell or solicit any offer to buy a security.
1668864-3

CA License # 0L72568