Welcome Summer – So far, this summer in the Northeast has brought some unusual weather. We’ve had some abnormally cold nights in the 40’s, cool days in the 50’s, and some very hot days well into the 90’s. Each week brings something different. But for us, it’s still better than the cold winter. We’ve not had a lot of luck with our normal hiking routine, due to some dog-related issues we are dealing with, but we hope to get back to it soon. I hope you all had a great spring and are enjoying the summer and finding a way to get back out into the world after the long pandemic lockdown. Enjoy and be well.
The photo shown is one of our newly updated team. You can see myself, Sandra and John, and also our newest advisor hire, Luke Pergola, who joined us in late April. Luke comes to us with some finance experience from an insurance company he worked for previously. We hired John about 4-1/2 years ago and he’s turned out to be a great addition. John has completed his CFP designation and he and I work together on many client-related topics. Honestly, we learn from each other. Now we’ve brought Luke on board with the hope that he will learn, engage with clients and contribute just as much over time. We are happy to report that our business and local reputation continues to grow and improve. We are lucky and grateful to be in such a good place after more than a year that was very difficult for so many.
Last Quarter Round Up
The market has continued its positive momentum with June 30 hitting a new record high for the S&P 500. For the quarter the S&P 500 was up 8.55% making it 15.25% for the year so far. International markets were up 5.17% for the quarter and are up 8.83% for the year. Emerging markets were up 5.05% for the quarter and 7.45% for the year. Bonds were up 1.83% for the quarter and down -1.60% for the year. Short treasuries were off -0.05% for the quarter and down -0.10% for the year. Bonds continue to struggle with the lack of clarity on inflation and the effect on interest rates. My guess is the next year will present challenges for bonds, but as we progress through 2022 I expect that situation will improve.
I think the biggest story to tell for the second quarter is the clear progress made by the U.S. in fighting the pandemic. While we will miss the 70% vaccination target set out by President Biden, we are at about a 50% vaccination rate. Only three states are not fully open, with the last one expected to open in July. Newly reported cases, and deaths, are near zero. Spending time outside the house has become more normal, and it’s starting to feel like the pandemic is almost behind us. Obviously, all that can change quickly if we become afflicted with some new variant (i.e. Delta?), but I’m taking the optimistic route until then. My congratulations and thanks to all the front-line workers who helped make this happen in such a remarkably short time.
Current Quarter Outlook
This might be a good time to get into the recent news and conjecture of what is happening to interest rates, and more specifically, inflation. From my view, there is no question that inflation is rising, but I am not in the camp of seeing us going back to the 1970’s or early 1980’s type of inflation. Looking at the fundamental data, the pandemic has created gaps in the supply chain for a variety of end products and the components that go into those end products. A great example is the shortage of computer chips that is affecting manufacture of everything from automobiles to kitchen appliances. Whenever gaps in the supply chain exist, shortages of products follow. The general population is getting back to normal, and they are looking to buy items they may have postponed during the pandemic. Those people have the money and are ready to buy, but in some cases the products are not on the shelf. Higher demand than supply leads directly to higher prices. However, since the 2008 Global Financial Crisis (GFC) we have had low inflation in the range of 1.3% to 1.7% per year. The Federal Reserve (Fed) has a target of 2.0% that they have not been able to reach. There are structural issues in our country that have kept inflation low. These pandemic effects will push inflation above the 2.0% target into 2022, but I believe by late 2022 or 2023 we will see inflation back at those lower than 2.0% levels. Currently the 10-year U.S. Treasury rate is about 1.5% and it hasn’t moved much because of pending inflation. This suggests to me that bond market, in aggregate, is not concerned about an inflation problem.