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Stock Markets Continue Their Rally; Bonds Hurt by Inflation Fears Thumbnail

Stock Markets Continue Their Rally; Bonds Hurt by Inflation Fears

Each of the US stock indices rose last week, with the Dow (+1.1%), NASDAQ (+1.3%), and S&P 500 (+1.8).  The Dow and S&P 500 eclipsed their all time highs last week before falling off their highs on Friday, while the NASDAQ reached within 2% of its peak.  Conversely, taxable bonds and tax-free municipal bonds continued their 3-month slide, as each dropped by about 0.3% - 0.5% for the week.  Bonds continue to slide as the 10-year Treasury ascends above 1.65%, responding to inflationary pressures.

 

Economic reports continue to flow in and demonstrate favorable economic conditions, except the threat of inflation continues to damper the spirit of investors.  Last week, unemployment claims dropped to a new pandemic low, and earnings reports surpassed expectations by a wide margin, but note that less than 20% of companies have reported thus far.  However, 40% of those companies that reported their earnings have also implied that they are worried about pressure from the labor market, which has also fueled the supple chain disruptions we have experienced in the US.  Both of these conditions also add to fears of inflation, which are the biggest risk to the markets at this time.




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