market commentary

The Federal Reserve is shifting gears, with its evolving stance headlined by an early November decision to start reducing asset purchases.

This IRS issued Notice 2021-61 Thursday updating for 2022 dollar-amount ceilings and thresholds for a wide range of qualified retirement plans and accounts, including traditional individual retirement arrangements (IRAs) and Roth IRAs.

Another earnings season has come and gone, and this one has been stellar, with 82% of the S&P 500 companies beating expectations. Overall, profits climbed by more than 30% in the third quarter. Not surprisingly, the stock market continues to set records, with solid results boosting investor confidence.

Wall Street is back to setting records. This renewed strength came after a stellar profit performance in the third quarter, in which a range of financial and industrial concerns showed notable improvement. In all, 84% of the S&P 500 companies had positive earnings surprises in the period.

The Federal Reserve is getting into position to move the goal posts. True, it doesn’t plan to shift them dramatically, but it does seem likely to do so modestly and earlier than previously thought. Heretofore, it was expected the Fed would eventually reduce its vast bond purchases.

Inflation is heating up, with the Consumer and Producer Price Indexes surging by 0.6% and 0.8%, respectively, in May. Worse still, prices were up 5.0% and 6.6% in the latest 12 months, the former of which was the biggest uptick since August 2008, when the U.S. economy was in free fall. In all, inflation has been trending higher since January.

Inflation is a hot topic on Wall Street these days, with key economic reports showing notable increases in pricing pressures. Specifically, the price index for gross domestic purchases surged 3.9% in the first quarter, up from 1.7% in the preceding period.

Inflation is becoming a concern for Wall Street, with April data on producer (wholesale) and consumer prices proving unsettling. Specifically, the Producer Price Index (PPI) rose 0.6% last month, or twice the projected increase, and 6.2% in the past year.

There’s plenty of good news to go around, with one release after another pointing to increasing levels of business activity. Leading the way as April closed out was The Conference Board’s March report on the Leading Economic Indicators (LEI), which rose 1.3%.

It has been an unprecedented 12 months. True, 2020 started out routinely enough with just an orderly deceleration in business activity during the winter. But a difficult close to the first quarter followed, with COVID-19 spreading across Asia, Europe, and the new world.