By Jeff Anderson, CFA
The S&P 500 opened down on Monday after news of a strained exit for American armed forces from Afghanistan as well as more news of increased cases of COVID-19’s delta variant. By Tuesday afternoon, the index was making all-time highs. By Friday’s close, it was down 0.6% for the week.
On Thursday, the Labor Department reported jobless claims of 348,000 for the week ending August 14th which is a new pandemic low but well above the approximate 200,000 level that existed prior to the pandemic.
The Fed will be holding its annual Economic Policy Symposium in Jackson Hole, Wyoming August 26th. Fed Governor Jay Powell will deliver his remarks on the 27th and Fed watchers will be looking for any signals about tapering its asset purchases as well as the economic outlook. Inflation will likely be a key topic.
While on the topic of inflation, Krispy Kreme announced this week that they will consider increasing prices in September in response to rising costs for key commodities like sugar and edible oils that go into making their delicious donuts. Whether the inflation in commodities is transitory or not, it’s a good reminder that prices for food, energy, clothing etc., will continue to rise and eat away (no pun intended) at your retirement savings.
When Krispy Kreme opened in 1937 a dozen donuts cost $0.80. Today, that same dozen costs $8.00. (1) Over time, prices rise. Period. Add that to the other two certainties in life.
Yet despite this example of food inflation, the debate remains whether this sudden increase in inflation (“CPI”) is transitory. The 10- and 20-year US government treasury yields are still below 1.5% and 2% respectively. If inflation truly takes hold, the bond market will send a clear signal in rising long-term yields.
Enjoy the weekend!
Jeff Anderson, CFA