I was a little early in calling a vacation slow-down in the markets last week! After seeing a 2% drop on Monday, the markets rallied all week to close near the all-time highs. I guess the volatility game is not over for now after all. What we did see post Monday was a serious amount of cash put back to work. This only further solidifies our thinking that you simply are not being rewarded with cash in the bank right now. Low interest rates are pushing investors or potential investors to seek better yields. The traditional role of “saving” has transitioned to investing over the last year or so. With the current inflation rate rising in the near-term and sitting above 5%, money in the bank paying you sub 1% is losing value. Think about that! It’s a tough pill to swallow when you open your monthly bank statement and see the amount of interest that is being paid on your hard-earned money.
Another positive driving force has been corporate earnings. Overall, profit margins are holding, up even in the face of the current inflationary environment. On top of that, estimates for the rest of year continue to rise. While many forecasters had predicted that the 2nd quarter would be the peak of earnings growth in the near-term, new commentary is suggesting that peak earnings is still to come. Consumers remain resilient in their spending and are willing to accept higher prices in the current environment.
The Delta Covid variant remains a concern considering all the positives out there from a financial perspective. We simply cannot ignore the fact that those unvaccinated individuals will be highly susceptible to this version of the virus. Numbers are spiking in certain regions, and I believe that we will see a growing need for a “booster” shot as we head into the fall. Unfortunately, the Covid headlines will remain a story and concern as we move through the second half of the year. As evidenced this past week, money is out there and ready to find a home. Pullbacks in the markets are being met head-on with fresh injections of cash. The music has not stopped, the party is raging on. Let’s just hope the summer hangover, if there is one, is met with plenty of aspirin and water!
Have a great weekend!
Your local Towson Financial Advisors
https://www.usinflationcalculator.com/inflation/current-inflation-rates/
Christopher E. Wasson, CFP®