The S&P 500 hit a new record high this week, and the 10-year Treasury yield broke below the 1.50% mark for the first time since March. Traders on Wall Street have fallen into a summer torpor that may be hard to shake until the Fed’s annual meeting in Jackson Hole.
Like last month, the May CPI showed a large jump in inflation, but it was mostly due to baseline effect. Back in May 2020, the economy remained mostly shut down due to the pandemic. Compared with May 2019, the CPI grew about 2.5% per year over last two years. A 2.5% increase per year was slightly higher than the previous level, but it is not outrageous. The current price increases are mostly due to the production bottleneck of a small number of commodities due to the impact of the pandemic, and these production factors are mostly temporary. As a result, we do not worry too much about the inflation.
However, while the market and the Federal Reserve believe that inflation is only transitory, they may have overlooked the risk of the pandemic in emerging markets, including Asia. These emerging countries have played an important role in the global supply chain. If the pandemic becomes severe enough to affect production and cannot be resolved immediately, the transitory inflation may evolve into long-term inflation. Therefore, gold and commodities are still essential for asset allocation.
America is now averaging fewer than one million shots per day, even though age 12 and older is eligible. That is putting Biden’s goal of 70 percent of adults being vaccinated by July 4 increasingly out of reach.
President Biden distances himself from enhanced unemployment benefits. Following Friday’s solid but unexceptional jobs report, Biden said he wouldn’t extend the $300-a-week payments, which expire in September.
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