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By Bill Hornbarger, Chief Investment Officer

Three Things to Watch

  • Second quarter earnings season kicks off this week with the usual early reports from financial companies including JP Morgan Chase, Goldman Sachs, Bank of America, Wells Fargo, and Charles Schwab, among others. PepsiCo and Conagra are two other early quarter bellwethers that report this week.
  • Inflation watchers will have plenty to chew on this week with CPI (Tuesday), PPI (Wednesday), and import prices (Thursday) all expected to be strong. CPI and core CPI are forecast at 4.9% and 4% YoY respectively, which will continue to keep the topic of inflation front and center. While the Fed uses a different inflation measure than CPI, a reading of 4.9% would be well above the Fed’s target and comfort zone, although they still indicate a belief that inflation pressures are transitory.
  • Fed Chairman Jerome Powell testifies in front of the House Financial Services Committee Wednesday and the Senate Banking panel on Thursday. His appearance before Congress is part of the Fed’s semi-annual report to lawmakers on the economy, financial developments, and monetary policy. Expect him to be pressed on inflation and the Fed’s timing and path to normalizing monetary policy.

Three Things to Know

  • Expectations are for S&P 500 earnings to rise by nearly 64%, a near-record (second to a season during the rebound from the Global Financial Crisis more than a decade ago). Financial firms are expected to be part of that broad boost, but so are industrials, materials and consumer discretionary stocks – those sectors sensitive to a challenged but rapidly recovering economy. (Source: Seeking Alpha)
  • As of July 8, 2021, the so-called Buffet Indicator is at an all-time high. It is the ratio of the total value of the U.S. stock market vs. current GDP. As of July 8th, the ratio was 233% ($534 trillion/$22.9 trillion). That is 87% (2.8 standard deviations) above the historical average but not surprising considering historic low interest rates. (Source: Current Market Valuation)
  • As of June 30, 2021, the average annual pay for an entry level bachelor’s degree in New York is $47,261 per year. (Source: Tyler Swartz, @swartxcenter)

 

The above information reflects the current opinion of the author. It is based upon sources and data believed to be accurate and reliable. Opinions and forward-looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security mentioned.