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Inflation And What the Fed Is Saying
A complete picture of the reaction to the July 16 Federal Reserve (Fed) meeting is yet to come and may be more muted. Both stocks and bonds reacted strongly to the outcome of the Fed’s most recent policy meeting, but the initial reaction often doesn’t reveal market participants’ full assessment.
- The Fed “dot plots” indicated a large shift in overall committee rate hike expectations, but much of the shift likely came from non-voting members.
- Inflation projections for 2021 were adjusted meaningfully higher, but projections for 2022 and 2023 remained consistent with a transitory spike.
- An adjustment to changing expectations is healthy, and we’ll be watching closely how Fed speakers frame the outcome over the next several weeks.
- For more on the Fed and inflation, see LPL Research’s most recent Weekly Market Commentary, available at 1:00 p.m. ET.
Daily Insights
U.S. equities attempt to stage a recovery this morning amid last week’s selloff
- The Dow Jones Industrials leads all US markets higher as investors keep an eye on inflation amid last week’s Federal Open Market Committee (FOMC) meeting.
- European equities are higher as market participants await this month’s consumer confidence number.
- Asian stocks finished mostly lower with Japan (Nikkei) pulling back over 3% following U.S. market results last week while China keeps its benchmark lending rate unchanged.
Week ahead
The following economic data is slated to be released this week:
- Tuesday—Existing home sales (May)
- Wednesday—Building permits and new home sales (May), current account (Q1), Markit PMI Composite (Jun)
- Thursday—Weekly initial and continuing claims, wholesale inventories and durable orders (May), revised GDP (Q1)
- Friday—Personal income and personal consumption (May), University of Michigan sentiment (Jun)
Technical update
Last week the Dow Jones Industrial Average lost 3.4% for its worst week since late October 2020. The move sent the benchmark index below its 50-day moving average for the first time since January, leaving 32,000 as the next key level of support to watch. The 50-day moving average now sits at 34,183 and may mark resistance on near-term rallies.
Sustainable Investing Becoming Mainstream in Fixed Income
Inflation seems to be on the rise, but LPL Research believes there are good reasons to think it will be transitory. Learn more in this week’s Weekly Market Commentary, available at 1:00 p.m. ET.
New Highs In Inflation and Stocks
On this week’s LPL Market Signals Podcast, LPL Research looks at the better than expected market highs, inflation concerns, and sustainable investing in the fixed-income market.
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