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Market Snapshot June 11, 2021

Good Friday AM,

Treasuries and Mortgage Bond prices are pulling back this morning. This should not be any surprise after the leap bonds made higher in price, lower in yield after yesterday’s stellar CPI number. CPI increased the most in 13yrs yet bonds yields, which are driven by inflation (or inflation expectations), dropped like a rock to 1.45%. What gives? Well, it is complicated. The quick answer is that most financial products are interconnected in some way. Sometimes that correlation is stronger, sometimes weaker. Yesterday’s inflation metrics were not as correlated to bond yields as they typically are because: 1) The Fed continues to see inflation as transitory and we may have seen CPI top out. 2) Treasuries at 1.50% rate (approximately) are still better than zero rate from other sovereign bonds. 3) the US dollar continues to weaken, so buying US Treasuries costs less in foreign currency than it typically would. I am bond bullish and expect rates to seep lower however, price is never linear. We often take two steps forward and one backwards on the way up.

How about this for some great news….

U.S. household wealth jumped to a record $136.9 trillion at the end of March, a report from the Federal Reserve showed on Thursday, suggesting plenty of dry tinder for economic growth as the coronavirus pandemic recedes and the nation reopens.

Which higher prices are here to stay? Some increases—such as for airfares, restaurants and women’s suits—reflect a return to normal after prices collapsed last year due to business closures, government restrictions and consumer caution. Some—such as car and truck prices—are due to shortages of specific components or materials. Such jumps are likely to prove temporary. Other price rises, however, could reflect more lasting changes in workers’ and consumers’ behavior over the past year. Prices for furniture, appliances and other home goods, for example, rose sharply during the pandemic and are continuing to climb as people still spend more time at home than before the pandemic, Gwynn Guilford reports.

And last, I know I continue to beat the drum that the only way to sustainable growth is to get people back to work (and off unemployment). Even with signs of progress, the number of people on unemployment rolls remains elevated. In the week ended May 22, 15.3 million Americans received jobless aid through regular state and federal pandemic-emergency programs. Some businesses and Republican lawmakers say federal pandemic benefits create a disincentive to work. Half of U.S. states plan to end participation in federal supplemental unemployment benefits before the program expires in early September.

Please remain safe and healthy, enjoy the weekend, first make today great.