The Bottom Line
● U.S. stocks rallied again late in the week, this time enough to set new record highs. The S&P 500 gained + 0.4%, and the small cap Russell 2000 led for the third straight week with a gain of +2.1%.
● On Thursday, the Labor Department reported that consumer inflation jumped +5.0% from last year, the most since August 2008. Core inflation, which excludes food and energy, jumped +3.8% ‐‐ the most since 1992.
● Used Vehicle prices are surging, up +4.6% from the previous month, and up +48.2% from a year ago. Prices in all major market segments were significantly higher than a year ago, with pickup trucks leading the price gains.
Stocks start soft, but rise to new highs
U.S. stocks finished mixed in another choppy week of trading following a pattern that has persisted for several weeks in which weakness in the beginning of the week subsides to strength at the end of the week. The S&P 500 posted fresh records on Thursday and Friday. In a counterintuitive market reaction to May Consumer Price Index (CPI) data that was well above expectations, bond yields fell. The yield on the 10‐year U.S. Treasury note dropped ‐10 basis points to 1.45%, its lowest level in a month. Normally one would expect bonds to struggle after such a strong inflation report, but investors must be taking the Fed at its word that they are not close to tapering. One asset that did behave as anticipated given the unexpectedly strong inflation data, was Oil, which ended the week above $70 a barrel for the first time since October 2018, up +95% in the last year. With stocks hitting all‐time highs, the Cboe Volatility Index (VIX) fell to 15.65, its lowest level since February 20 of 2020. Stocks were up overseas as well, buoyed by eurozone economic growth that contracted less than expected. Plus the WorldBank provided a boost, increasing their Global GDP growth forecast to 5.6% this year, revised up from 4.1%.
Digits & Did You Knows
DISAPPEARING ACT — If you bought a 5‐year U.S. Treasury note this week in June of 2020 (at a yield of around 0.33% at the time), the rise in Consumer Price Index (CPI) – a prominently used gauge of inflation – in one year already outpaced all five years of the interest payments you will receive (source: Bloomberg).
COME FLY WITH ME — There were over 1.8 million airline travelers per day over the last week in the U.S., the highest amount since March 13, 2020. This time in June of 2020 the U.S. was averaging 400,000 per day and at the COVID‐19 low last April, U.S. airline travelers averaged below 100,000 per day (source: TSA.gov, Compound Capital).
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Source: Bloomberg. Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange‐traded funds recommended by the Prime Capital Investment Advisors. The performance of those funds may be substantially different than the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐YieldBond(iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (SPDR® Bloomberg Barclays International Corporate Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 ValueETF);MidGrowth(iSharesRussell Mid‐CapGrowthETF);MidValue (iSharesRussell Mid‐Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by: 30% U.S. Bonds, 5% International Bonds, 5% High Yield Bonds, 10% Large Growth, 10% Large Value, 4% Mid Growth, 4%Mid Value, 2% Small Growth, 2% Small Value, 18% International Stock, 7% Emerging Markets, 3% Real Estate.
Advisory services offered through Prime Capital Investment Advisors, LLC. (“PCIA”), a
Registered Investment Adviser. PCIA doing business as Prime Capital Wealth Management
(“PCWM”) and Qualified Plan Advisors (“QPA”).
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