by William Henderson, Vice President / Head of Investments
U.S. stocks finished last week in a quiet session that saw mixed results for the week.  The Dow Jones Industrial Average rose +0.9%, the S&P 500 Index rose +0.7% while the NASDAQ fell by -0.1%. Full year 2021 returns remain healthy across all three indexes. Year-to-date, the Dow Jones Industrial Average has returned +17.3%, the S&P 500 Index +20.0% and the NASDAQ +15.5%; representing a wide-ranging rally across industries and sectors. Bonds changed only slightly with the yield on the 10-year U.S. Treasury dropping two basis points to 1.28% from the previous week’s 1.30% and a full 46 basis points lower than the 1.74% yield level hit in March of this year (see chart below from the Federal Reserve Bank of St. Louis). Overall, low rates continue to fuel the economic recovery and give commercial banks a leg up by borrowing low and lending higher. 

The Q2 earnings season concluded with stronger than expected results from Dow Jones member Walt Disney while food delivery vendor DoorDash reported a wider than expected loss with added negative commentary. The results showed just what one would expect as the economy opens: more travel and leisure activities benefited Disney while greater restaurant openings and more diners hurt DoorDash. We may continue to see divergent trends in corporate earnings as companies react differently to the economic recovery. 

The late Donald Rumsfeld, former U.S. Secretary of Defense, used to speak of the “battlefield” in terms of “knowns and unknowns.” He understood we had terrorism in the world; it was a known largely in the form of bombings. For example: the 1983 U.S. Marine Corps barracks bombing in Beirut, Lebanon or 1993 World Trade Center bombing in New York City. Terrorism existed but it was generally “known” to be suicide bombings in the form of car and truck bombs. No one expected commercial airplanes to be hijacked and used as suicide weapons on September 11, 2001; and the result was the markets tanking. It was what Mr. Rumsfeld feared the most: “unknown, unknowns.”  The COVID-19 Pandemic was an “unknown” that no one was prepared for, and the markets rightly reacted by tanking again. Markets have experienced virus outbreaks before, including the bird flu, SARS, and Ebola to name a few; but COVID-19 was new and “unknown”that’s why they called it a novel coronavirus.   

Right now, we have a few things people are worried about, including inflation and resurgent COVID-19 in the form of the Delta variant.  So why are the markets still quietly rallying? Because these concerns are now “known”concerns, and we have the tools in place to fight them. If inflation reaches an average of 2%, along with falling unemployment, the Fed will raise interest rates. The existing vaccines for COVID-19 can protect from the Delta variant, we just need vaccination rates to keep increasing worldwide. We have talked about markets being efficient many times before, and now is a prime example. The markets see the eventual outcome and understand that concerns exist, but these concerns are “known” concerns and solutions exist to fix them. Efficient markets, a helpful Fed and a long-term investment outlook remain firmly in place.

Finally, look at the graph below (from The Federal Reserve of St. Louis) showing the U.S. Gross Domestic Product since 1950. It is truly amazing. Q2 2021 GDP hit a staggering $22.7 trillion and all but erased the pandemic-related recession of 2020.   

by Maurice (Mo) Spolan, Investment Research Analyst

The S&P 500, Dow Jones and Nasdaq were up +0.96%, +0.87%, and +1.03% respectively last week, continuing the very strong year for U.S. equities in which all three indices are up in the mid to high teens year-to-date. The strong stock market performance has been fueled by the expectation of very strong earnings. Corporations did not disappoint, as sales and earnings grew 25% and 89% in Q2 2021 versus Q2 2020. Q2 is anticipated to be the peak for both year-over-year GDP and earnings growth, given how week the comparison period was in 2020; but economic activity should remain strong to finish out the year.

The key economic data point released last week was job additions and unemployment. The U.S. economy gained 943,000 jobs in July, beating expectations. Correspondingly, the unemployment rate fell to 5.4%. Not coincidentally, the 10-year Treasury rose on the news from approximately 1.15% to 1.3%. The Fed has dual mandates of 2% inflation and 4.5% unemployment. While inflation has run meaningfully above the 2% threshold in the past few months, the Fed has not committed to raising rates since it also wants to bring unemployment down to 4.5%, and higher rates generally curb hiring. As unemployment creeps closer to the Fed’s target, the central bank is likely to be more willing to increase interest rates to fight inflation.

by Maurice (Mo) Spolan, Investment Research Analyst
The Dow Jones, S&P 500 and Nasdaq 100 returned -0.36%, -0.35%, and -1% last week. Nonetheless, July represented the sixth straight positive month for the S&P and all three indices are up healthily – between 15% and 18% – year-to-date.

In economic news, U.S. GDP increased at a 6.5% annualized pace in Q2. While a very high number, based on historical standards, the result was far below expectations of 8.4%. At least some of the shortfall is attributable to the global supply chain constraints, as lack of inventory decreased GDP by nearly $200 billion. On the positive side, the U.S. has now recovered all its GDP losses incurred during the pandemic. Consumer spending increased at an average 12% pace and consumer confidence is at a 17-month high. Economists expect U.S. GDP to decelerate to some degree in the second half of the year, but overall, for growth to remain very healthy.

Q2 S&P 500 results are incredibly strong, as sales and earnings are up 21% and 86%, respectively; growth rates in both metrics are near or at record levels. Similar to GDP, corporate results are exacerbated because they are compared to a period in 2020 in which economic activity was extremely limited. On the other hand, many companies are struggling with inventory shortages, which curbed results. Analysts anticipate that corporate performance will remain strong through this year and into next.

The Fed concluded its two-day meeting by leaving rates near zero, as expected. Jay Powell cautioned that the economy has a way to go before the Fed moves rates upwards but has made significant progress towards the Fed’s goals. Powell reiterated, yet again, his view that inflation is transitory. By contrast, the IMF (International Monetary Fund) expressed the opposite view and recently encouraged global central banks to take preemptive action to prevent inflation.

by William Henderson, Vice President / Head of Investments
Last week’s rollercoaster ride in the markets ended with the Bulls taking command by the end of the week with each of the major stock market indexes finishing well into positive territory. For the week, the Dow Jones Industrial Average gained +1.1%, the S&P 500 Index added +2.0% and the tech-heavy NASDAQ gained an impressive +2.8%. Weekly gains added to an already strong year of returns across all three indexes. Year-to-date, the Dow Jones Industrial Average has returned +15.7%, the S&P 500 Index +18.4% and the NASDAQ +15.5%. Treasury Bonds rallied for another week, with the yield on the 10-year U.S. Treasury Bond falling by 2 basis points to close at 1.23%. Bonds continue to puzzle investors as most traders expected yields to rise this year as the Fed started to taper its bond purchases.  The Fed meets this week and perhaps during Chairman Powell’s press conference after the meeting we will get some direction. The bellwether 10-year U.S. Treasury Bond dropped more than a quarter percentage point since the Fed’s last policy meeting, and at that meeting we saw the U.S. central bank officially kick off discussions about a timeline for reducing asset purchases (tapering) and lifting interest rates from their current 0-0.25% range. 

As mentioned, we saw a broad rally in the markets last week. This was in stark contrast to concerning news around the spread of the Delta Coronavirus. The markets seem to be signaling that the spread will be contained and strength in many other sectors of the economy will continue to fuel a strong recovery. Among the positive economic indicators is the falling unemployment rate and strong corporate earnings.  (See chart below from the Federal Reserve Bank of St. Louis) 

Unemployment continues to fall and the initial supply of labor and demand for labor imbalance seems to be abating a bit; especially as unemployment benefits taper off. Most earning releases for the second quarter exceeded analysts’ expectations but remember the results were compared to 2020’s drastically reduced earnings as a result of the pandemic. Third and fourth quarter results will prove to be a more important indicators of a true earnings recovery. 

There was an interesting twist thrown into the always fun cryptocurrency market as Bloomberg reported seeing Amazon’s “Job Vacancy” website listing an advertisement for a “digital currency and blockchain product lead.” The news sent many cryptocurrencies higher after being battered for several weeks. Bitcoin surged to a six-week high just below $40,000, (see chart below from Bloomberg). 

The possibility of the world’s largest internet retailer accepting cryptocurrency for payment or even creating their own Amazon specific cryptocurrency has breathed some life into the recently faltering market. If nothing else, this market is exciting to follow. 

As stated above, the Federal Reserve meets this week to discuss monetary policy, inflation expectations and unemployment concerns. Most economists do not see this as being a pivotal meeting. According to Bloomberg, three-quarters of economists they surveyed expect the Fed to hold off on signaling a tapering of asset purchases or an increase in rates until the at least the Jackson Hole, Wyoming Fed Retreat Meeting in August, or the September 21-22 meeting. That said, watch for any signal from Chairman Powell at the press conference where he could hint to a change no one expects. 

We believe the economy is well under way for its recovery, vaccines exist for COVID-19 and its variants, and corporations and consumers are in excellent financial shape. Healthy markets always have pull backs and sell offs during an extended bull rally and we expect the same in 2021.  

by William Henderson, Vice President / Head of Investments
With second quarter earnings season well under way, last week saw a slight retreat in all three major indexes as stocks sold off a bit from their previous highs. The Dow Jones Industrial Average fell (-0.5%), the S&P 500 Index lost (-1.0%) and the NASDAQ sold off by (-1.9%).  Regardless of last week’s modest sell off, year-to-date returns remain strong across all three indexes.  Year-to-date, the Dow Jones Industrial Average has returned +14.5%, the S&P 500 Index +16.1% and the NASDAQ +12.3%; representing a broad rally across industries and sectors. Bonds continued to be torn between inflation-related news and Federal Reserve Chairman Powell’s commitment to keeping rates lower for longer. Confounding bond bears, yield on the 10-Year U.S. Treasury dropped an additional nine basis points last week to close at 1.25%, a full 49 basis points lower than the 1.74% yield level hit in March of this year. 

Inflation news was all the rage last week when a monthly measure of U.S. consumer prices rose at the fastest pace since 2008. June’s Consumer Price Index rose 5.4% from the same period a year earlier, which surprised most economists who expected the recent spike in inflation to begin to moderate. (See chart below from the Federal Reserve Bank of St. Louis.) 

While the spike in inflation was much larger than expected, breaking down the results revealed that about 1/3 of the increase was due to increases in used-car prices. Inflationary pressures were certainly broadly felt by consumers elsewhere, as food prices increased 0.8% in June and gasoline prices rose by 2.5%. In his report to a U.S. Congressional Panel, Powell repeatedly stated two things: 1) He would not hesitate to raise interest rates if needed to control runaway inflation; and 2) He expects consumer prices to ease later this year. However, Powell firmly believes significant progress in terms of employment and inflation is still needed before short-term interest rates are increased.   

Wall Street analysts are expecting strong earnings results from companies focused on technology, materials, and healthcare as final 2Q results are announced.  Looking beyond 2Q, companies will have to deal with increases in prices of materials and labor and this could certainly impact earnings, especially in firms where their ability to pass on costs to consumers is limited. Conversely, we have seen some modest price declines in materials like copper and lumber. The overall supply/demand mismatch is abating and these factors will assist companies going forward.   

The moves in U.S. Treasury Bond prices as noted above with the 10-year note falling to 1.25% seem to harken back to the early trading patterns when the pandemic first struck in 2020. Surging cases of the new Delta variant of the COVID-19 virus in many parts of the world, including highly vaccinated countries such as the U.K., could be prompting a flight to quality by investors. Lastly, any impediment to a continued re-opening of the global economy will impact future economic growth and concomitant earnings results for equities. Concerns abound and markets are a tricky business. Modest pull backs in equity markets like last weeks and even larger corrections in bull markets are healthy and expected. Equity prices never go straight up, they go up and down and up; generally going from the lower left of a chart to the upper right. Keep focused on long-term trends and a Federal Reserve that is committed to a healthy recovery.

With the first half of 2021 well behind us, the second half started as simply more of the same thing. We saw positive returns across all three market indexes despite concerns about COVID variants and global growth. The Dow Jones Industrial Average rose by +0.7% last week and the S&P 500 Index and the NASDAQ both increased by +1.2%. Solid weekly gains in all three indexes allowed new highs across the board and set up very strong year-to-date gains as well. Year-to-date, the Dow Jones Industrial Average has returned +15.1%, the S&P 500 Index +17.2% and the NASDAQ +14.5%. Further, the earlier rotation between value and growth has abated as markets overall have converged upon similarly strong gains thus far in 2021. Bonds continued to be well bid and the yield on the 10-year U.S. Treasury dropped 10 basis points last week to close at 1.34%, a full 40 basis points lower than the 1.74% yield level hit in March of this year.   

While the labor markets continue to show solid improvement, the pace of job gains has slowed a bit and last week we saw a bit of that slowness in the slight uptick the weekly jobless claims number released by the U.S. Department of Labor Department (see chart below).    

Further, while the unemployment rate continues to fall from a pandemic high of 14.8% in April 2020 to the current 5.9%, a supply of and demand for labor mismatch exists (see chart below from the U.S. Department of Labor).   

One theory around this supply/demand mismatch is that during the pandemic we saw large scale demographic shifts in population as people moved residences; potentially due to COVID-19 reasons, work-from-home flexibility in family employment or simply the need to seek varied employment elsewhere. Regardless of the reasons, we may see an imbalance in worker demand and worker supply for some time and this economic oddity could weigh on the markets for a while. However, recall the Federal Reserve has been consistent in its message about two measures before they raise interest rates: the unemployment rate and inflation. We have seen inflation, transitory or not, in recent CPI numbers, but we have not seen unemployment at or near their target level of 4%, so watch for interest rates to remain low for longer, just as Chairman Jay Powell has stated repeatedly.

As the second half of 2021 unfolds, watch for labor to regain some strength as unemployment benefits begin to expire and workers return to work. With this acceleration in job growth, the unemployment rate will fall.  As we have mentioned frequently, the consumer remains in excellent financial shape with savings rates near recent extremely high levels (see chart below from the Federal Reserve Bank of St. Louis).   

Falling unemployment rates, financially healthy consumers and a cooperative Fed point to a strong economic expansion well into 2022 and certainly for the remainder of 2021. Like all economic indicators, concerns abound and can be impactful such as the emergence of a powerful COVID variant or unseen global unrest. We believe that the Federal Reserve will continue to back-stop the economy especially given an unforeseen global event. 

View/Download PDF version of Q2 Commentary (or read text below)

Stocks
Each of the three major U.S. equity indices – the Dow, S&P 500, and Nasdaq – were up between 12.5-14.4% through 2021’s first six months. The Dow had a quick start to the year while the tech-heavy Nasdaq lagged, but at this point, the performance disparity between any of three indices is immaterial, illustrating the breadth of the market rally.

Generally speaking, companies in the Nasdaq are more rapidly growing but less profitable today. For companies who have the bulk of their profits in the distant future – companies disproportionately located in the Nasdaq – rising interest rates are relatively harmful. This is because all corporate profits must be discounted to the present to derive a company valuation; profits further out are discounted more. By contrast, companies in the Dow are predominantly harvesting their profits in the present moment; thus, they are more immune to rate changes. Interest rates rose sharply to begin the year; as a result of the dynamic just described, this negatively impacted Nasdaq constituents more severely than companies in the Dow. However, rates stabilized – and have even declined – over the past couple of months, during which time the Nasdaq made up ground on its counterpart indices.

Bonds
Interest rates nearly doubled during Q1, as the 10-year treasury bond increased from approximately 0.90% to greater than 1.70% in the three-month span. Bond prices fall as rates rise; thus, major bond indices declined in Q1. In Q2, however, the 10-year fell to a range between 1.40-1.50% by period-end, and bonds were buoyed to end the first half.

The rate environment must be considered both in the context of historical precedents and current inflation expectations. On the former, rates remain extremely low, as the 10-year treasury generally hovered between 4-5% prior to the Great Financial Crisis and its subsequent monetary stimulus. Low rates facilitate economic activity, as consumers and businesses alike are incented to borrow money, spend on goods and services and invest in growth initiatives.

On the other hand, central banks are averse to inflation. Their means of obstructing this insidious force is hiking interest rates. Inflation simply refers to higher prices of goods and services. Prices are driven by supply and demand. Higher rates work to offset demand for goods and services because they encourage consumers to save their money rather than spend it.

The Federal Reserve – the U.S. central bank – holds a long-term inflation target of 2%; however, Jay Powell, Fed Chairman, has stated that he is willing to let run inflation run above this target over the short and medium term in order to facilitate economic growth. In April, inflation was 4.5%, its highest figure in some time; the figure decelerated to 3.5% in May. Chairman Powell believes that the high inflation numbers are the result of pent-up demand being unleashed on a globally constrained supply chain. Powell forecasts that inflation will moderate further over the coming months as supply chain bottlenecks resolve.

Outlook
Historically, strong first-halves in the equity markets portend strong second-halves; per Refinitiv, in every year since 1950 in which the S&P and Dow were up double-digits to start the year, they were positive in the final six months. Economic indicators also suggest a healthy second half of 2021 is forthcoming. The unemployment rate is well within normal range, sitting just below 6%, while the housing economy – represented by home prices and remodeling & renovation activity – is in its strongest condition since the Great Financial Crisis. Crude oil is priced at $75 – a three-year high – as the appetite for travel and mobility are surging. As a result of these trends and more, the International Monetary Fund has increased its projection for U.S. 2021 GDP growth from 4.6% to 7%; should the forecast come to fruition, it would represent one of the strongest years on record.

If there is a risk to the economy – and therefore, possibly the markets – over the coming six months, it is that of overheating. At present, the market is expecting the Fed to hike rates twice in 2023. However, if inflation persists – contrary to Chairman Powell’s forecasts – the U.S. central bank may be forced to take hastier action. Nevertheless, modestly higher rates are unlikely to unhinge the financial markets so long as economic growth remains strong.

by Maurice (Mo) Spolan, Investment Research Analyst
Last week, the S&P 500, Nasdaq and Dow were up 1.71%, 1.39%, and 1.5%, respectively. The positive week was consistent with first half performance for the three leading indices, all of which are up between 12.5%-14.4% through 2021’s first six months. The Dow had a quick start to the year while the tech-heavy Nasdaq lagged, but at this point, the performance disparity between any of three indices is immaterial, illustrating the breadth of the market rally.  Historically, strong first-halves portend strong second-halves; per Refinitiv, in every year since 1950 in which the S&P and Dow were up double-digits to start the year, they were positive in the final six months.

Economic indicators also suggest a strong second half of 2021 is forthcoming. The unemployment rate is well within normal range, sitting just below 6%, while the housing economy – represented by home prices and remodeling & renovation activity – is in its strongest condition since the Great Financial Crisis. Crude oil is priced at $75 – a three-year high – as the appetite for travel and mobility are surging. As a result of these trends and more, the International Monetary Fund has increased its projection for U.S. 2021 GDP growth from 4.6% to 7%; should the forecast come to fruition, it would represent one of the strongest years on record.

If there is a risk to the economy – and therefore, possibly the markets – over the coming six months, it is that of overheating. Inflation surged above 4% in April as aforementioned demand trends met a constrained global supply chain, leading to higher prices. Inflation cooled somewhat in May, increasing approximately 3.5% year-over-year. The traditional monetary policy response to inflation is rate hikes, as these incentivize consumers to save rather than spend. The Federal Reserve holds a long-term inflation target of 2% but has stated that it will let inflation run above 2% for some time to facilitate a strong economy. Jay Powell, the Fed Chair, believes recent inflation numbers are transitory and will ease as supply chain bottlenecks resolve. At present, the market is expecting the Fed to raise rates twice in 2023; accordingly, the risk is that inflation does not prove transient and the Fed hikes rates during 2022. Nevertheless, modestly higher rates are unlikely to unhinge the financial markets so long as economic growth remains strong.

by William Henderson, Vice President / Head of Investments
Last week the markets showed conditions remain favorable for equities as easy financial conditions and a healthy economic recovery are firmly in place for the foreseeable future. All three major indices posted strong weekly returns adding to their very healthy year-to-date gains. The Dow Jones Industrial Average rose by +3.4% last week, the S&P 500 Index rose +2.7% and the NASDAQ increased by +2.4%. The “value-over-growth” trade seems to have waned as the major indices have moved into relative parity on a year-to-date basis. Year-to-date, the Dow Jones Industrial Average has returned +13.6%, the S&P 500 Index +14.8% and the NASDAQ +11.8%. Bonds continue to be well bid with yields remaining stubbornly low. The 10-year U.S. Treasury dropped six basis points last week to end at 1.51%. 

Three additional factors boosted the markets. First, all 23 major U.S. banks including J. P. Morgan Chase, Bank of America, and PNC Bank passed the Federal Reserve’s annual stress tests, which are designed to test the resilience of large banks under severe global recessionary conditions. Second, after several weeks of negotiation, President Biden and a bipartisan group of senators announced an agreement on an infrastructure deal that could carve out up to $1 trillion from the $2.25 trillion American Jobs Plan that was released in March 2021. The agreement focuses on traditional infrastructure such as roads and bridges as well as water infrastructure and broadband internet access. The deal is a positive development because it comes with no new taxes and instead is funded by hodgepodge of revenue sources including repurposing unused pandemic relief funds, tougher Internal Revenue Service tax collection, and selling oil from the Strategic Petroleum Reserve. And third, inflation fears are modestly abating as supply chain pressures have eased and prices for basic commodities, including metals and lumber, fell from their recent spikes.   

It is important to keep inflation concerns in the proper perspective. The chart below shows the long-term U.S. Core PCE (Personal Consumption Expenditure) year-over-year percent change. The recent jump in U.S. Core PCE of +3.4%, is not that significant when you look at inflation over a much longer term. The Fed’s goal of +2.0% average annual inflation remains in place, which means rates remain low for longer. 

U.S. Core Personal Consumption Expenditure (PCE) 

(Source: Bloomberg & Goldman Sachs June 2021) 

As we move to close the second quarter, corporate earnings announcements most likely will surprise to the upside and revenue growth will remain robust. However, companies may have to deal with cost increases due to supply chain disruptions and higher wages going forward. The economic tailwinds for the second half of 2021 will be consumer driven rather than stimulus driven.   

Consumers are in excellent financial shape with personal savings accounts at record levels. According to the Federal Reserve Bank of St. Louis, M2, the money supply measure that includes cash, checking deposits and money market funds, reached $20.3 trillion on June 22, 2021 (See chart above). There is massive pent up demand for travel and leisure; and with summer upon us, watch for the consumer to fuel the economy and the Fed to keep the pump primed. 

by William Henderson, Vice President / Head of Investments
Last week, the markets saw negative returns after posting positive gains for several consecutive weeks. Of the three major indexes, the Dow Jones Industrial Average saw the biggest weekly decline, and the largest decline for that index in more than eight months. Value-style stocks once again underperformed growth stocks as the NASDAQ saw only a modest pullback. For the week that ended June 18, 2021, the Dow Jones Industrial Average lost -3.5%, the S&P 500 Index fell by -1.9%, and the NASDAQ fell by only -0.3%. Modest pullbacks are to be expected in any healthy stock market and last week’s negative returns did not significantly chip away at this year’s strong year-to-date returns. Year-to-date, the Dow Jones Industrial Average has returned +9.8%, the S&P 500 Index +11.7%, and the NASDAQ +9.2%. Bonds had a quick reversal during the week, with the 10-year U.S. Treasury initially spiking to 1.57% after the Federal Open Market Committee (FOMC) announcement about interest rates (more on that below) but calmed down by week’s end to close at 1.44%. (See the 5-day chart below of the U.S. 10-year Treasury Note – CNBC) 

The news of the week was certainly the FOMC meeting and the follow-up press conference by Chairman Jay Powell. The Fed raised its inflation forecast, and a dot plot of individual central bank members’ expectations on policy, signaled that an interest hike could happen sooner than expected, in 2023. Investors typically get spooked with the mention of higher interest rates, as cheaper (lower) rates help to spur economic growth. Further, St. Louis Fed President James Bullard told CNBC on Friday that he expected an initial rate increase to happen even sooner in 2022. “We’re expecting a good year, a good reopening. But this is a bigger year than we were expecting, more inflation than we were expecting,” Bullard said on CNBC’s Squawk Box. “I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.” That comment was in direct contradiction of Powell’s press conference comments that higher interest rates were not expected until 2023-24.   

Clearly, the markets are seeing the trends. First, global stimulus in the form of dollars to consumers is fading, which will lead to a contraction in in M2 (supply of money and savings). Second, the temporary demand/supply imbalances are ebbing allowing commodity prices to stabilize (lumber, critical for new building, led the way lower – see chart below from the Federal Reserve Bank of St. Louis). 

Third, the global economic rebound is continuing and now includes the Eurozone. These trends overall are positive for the market and continued economic growth, but they also point to inevitably higher interest rates in the not-to-distant future. The Fed will watch for inflation, which thus far has appeared (as mentioned last week, with the 5% jump in the Consumer Price Index). The question remains about whether the inflation will be transitory or more permanent. For us, the picture remains clear: last year featured collapsing global growth and massive stimulus. Looking at 2021-23 we see healthy growth and a cooperating Federal Reserve that is timid about raising interest rates too quickly.