During March 2021, the widening availability of COVID-19 vaccinations, signs of improving economic conditions, and a third, $1.9 trillion stimulus package brought about more optimistic growth projections. Even though a healthy economy could be good news for many businesses and the financial markets, rising inflation expectations caused a multi-week sell-off in U.S. government bonds that pushed up longer-term yields and sent the Nasdaq Composite Index into correction territory on March 8, 2021.
tocks suffered their worst week in quite some time, as each of the major indexes ended the week lower. Last week was the start of the second-quarter corporate earnings reporting period. Attention will be paid to reported earnings to gauge whether corporate profits can support equity valuations. Despite Fed Chair Jerome Powell’s repeated statements that the recent spike in inflation is temporary, last week’s rise in the Consumer Price Index and the Producer Price Index are likely to add fuel to the debate about the timing of the Federal Reserve’s stimulus reduction.
The holiday-shortened week can best be described as volatile. Some observers suggest investors may be retreating from stocks over uncertainties surrounding the pace of economic recovery coupled with easing inflation expectations. For much of the week, stock values road a roller-coaster ride of ups and downs, while Treasury prices climbed, pulling yields lower.
Stocks opened last week mixed. Tech stocks surged, driving the Nasdaq to an all-time high. The S&P 500 inched ahead, while the Global Dow (-0.8%), the Russell 2000 (-0.5%), and the Dow (-0.4%) fell. Besides technology, other sectors performing well last Monday included communication services, utilities, and consumer discretionary. Energy, financials, and industrials dipped lower. Treasury yields and crude oil prices declined, while the dollar was mixed.
If you pay attention to financial news, you are probably seeing a lot of discussion about inflation, which has reared its head in the U.S. economy after being mostly dormant for the last decade. In May 2021, the Consumer Price Index for All Urban Consumers (CPI-U), often called headline inflation, rose at an annual rate of 5.0%, the highest 12-month increase since August 2008.
After two years of decreases, interest rates on federal student loans are set to increase almost a full percentage point for the 2021-2022 school year.1 The interest rates on federal student loans are reset each year after the May auction of the 10-year Treasury note.
In general, workers seem to begin preparing for retirement almost as soon as they get their first job. However, according to the 2021 Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI), retirement preparations do vary a bit by age group.
Despite the economic shock of the coronavirus pandemic, American workers and retirees remain largely optimistic about their financial prospects for retirement.
In its annual Retirement Confidence Survey conducted in January 2021, the Employee Benefit Research Institute (EBRI) found that 80% of retirees and 72% of workers were either very or somewhat confident in their ability to afford a comfortable retirement.
On April 28, 2021, the White House released a fact sheet for President Biden’s American Families Plan (AFP), which proposes about $1 trillion in investments and $800 billion in tax cuts. There would also be tax increases for those making more than $400,000 per year. Major provisions proposed in the plan are summarized here, including some tax provisions.
In March 2021, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.6%, the largest one-month increase since August 2012. Over the previous 12 months, the increase was 2.6%, the highest year-over-year inflation rate since August 2018.