Commonwealth

Yesterday I appeared on Fox Business’ Mornings with Maria to discuss inflation and the market outlook. Watch the full segment.

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One of the biggest questions for the economy right now is the job market. The headlines are doing a good job covering the immediate issues—labor shortages, wage increases, and so forth. But the more I look at it, there are a couple of implicit assumptions in how we view the job market that need more consideration. For example, much of the analysis has taken what is going on now as something that is happening without any warning and for no apparent reason. But is that really the case?

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My colleague Sam Millette, senior investment research analyst on Commonwealth’s Investment Management and Research team, has helped me put together this month’s Market Risk Update. Thanks for the assist, Sam!

Equity markets started off strong in May, but volatility later in the month led to a partial pullback. The S&P 500 and Dow Jones Industrial Average (DJIA) indices both hit all-time highs earlier in the month before suffering from volatility. Despite the turbulence along the way, the S&P 500 gained 0.70 percent during the month, and the DJIA saw a solid 2.21 percent return. The Nasdaq Composite fell by 1.44 percent, as the heavy technology weighting led to additional volatility for the index.

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Much of the commentary on recent issues—especially inflation—has focused on terrible reported numbers. As always, though, it is helpful to remember there is nothing sacred about those numbers. They have assumptions and biases built in, which are unavoidable. As analysts, we need to understand those assumptions and biases, so we can see when they are reasonable (and when they are not).

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This will be the last of the Coronavirus Update videos, at least for the foreseeable future. There will be one more written update, which will be posted on the blog on June 25.

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The regular meeting of the Fed starts today. Tomorrow, the Fed will issue a press release, describing any actions it decides to take, and hold a press conference where the chair, Jerome Powell, will take questions.

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