As Fall Approaches

Despite the COVID Delta variant and the handling of its surge dominating much of the news, U.S. equities still gained ground last week. Amongst the myriad of “winners” last week, value stocks outperformed their growth counterparts. Not everything was rosy, however, as energy stocks slipped on concerns that oil producers may not maintain discipline on the supply side. Information technology stocks also lagged, driven by the pullback in the semiconductors and semiconductor equipment industry, which came under pressure from concerns about potential weakness in memory prices.

In a somewhat light week for U.S. economic data releases, all eyes were on the latest inflation numbers from the Bureau of Labor Statistics. The consumer price index (CPI) increased by 0.5% sequentially in July, a deceleration from the 0.9% registered in June and the smallest month-over-month uptick since March. Core consumer price inflation, which excludes volatile food and energy costs, came in at 0.3%. This slowdown in the inflation rate appeared to align with the prevailing narrative that increases in consumer prices should prove transitory. That said, the producer price index (PPI) increased by 1.0% sequentially for a second consecutive month. This uptick in PPI came in higher than many economists had expected. The trickling of these increases throughout the consumer side of the economy will be important to watch in the coming months.

In Washington, the Senate passed a roughly $1 trillion bipartisan infrastructure package, including about $550 billion in new spending, that aims to rebuild traditional transportation infrastructure, improve access to broadband internet in rural areas, and upgrade the electric grid and water systems. Senate Democrats also approved a $3.5 trillion budget resolution, the starting point for a reconciliation bill that would address administration priorities, such as improving access to education and increasing support for families with children. The details remain in flux, but this package is likely to include measures that would increase corporate taxes.

With fall fast approaching, the continued impact of COVID and the measures each state takes to manage infection could have direct impact on the holiday season.  The announcement of how the new budget and infrastructure plans will be paid for may also make their impact felt around the same time.  As always, when there are several large impactful issues on the horizon, we heed James 1:5, “But if any of you lacks wisdom, let him ask of God, who gives to all generously and without reproach…” while understanding “…that man ought not to expect that he will receive anything from the Lord” (James 1:7). Our team has its ear to the ground and its eyes peeled, ensuring that we are ready to evaluate any wisdom that comes our way!

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

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