20860  N. Tatum Blvd Suite 220 / Phoenix, AZ 85050

2021 Midwest Road Suite 200 / Oak Brook, IL 60523

8400 East Prentice Ave. Suite 1500 / Greenwood Village, CO 80111

888.494.4440

www.windsoradvisor.com

June 2021
Market Update
(all values as of 05.31.2021)

Stock Indices:

Dow Jones 34,529
S&P 500 4,204
Nasdaq 13,748

Bond Sector Yields:

2 Yr Treasury 0.14%
10 Yr Treasury 1.58%
10 Yr Municipal 0.97%
High Yield 4.24%

YTD Market Returns:

Dow Jones 12.82%
S&P 500 11.93%
Nasdaq 6.68%
MSCI-EAFE 9.03%
MSCI-Europe 11.95%
MSCI-Pacific 4.18%
MSCI-Emg Mkt 5.38%
 
US Agg Bond -2.29%
US Corp Bond -2.85%
US Gov’t Bond -2.95%

Commodity Prices:

Gold 1,909
Silver 28.14
Oil (WTI) 66.91

Currencies:

Dollar / Euro 1.21
Dollar / Pound 1.41
Yen / Dollar 109.42
Dollar / Canadian 0.82

Macro Overview

Financial global markets are draw­ing sup­port from the effectiveness of ongoing vaccinations and improving economic indicators. Consumer sentiment is re-evolving, resulting in rising consumer demand as pandemic worries wane. Pent up demand from the past year is thought to be driving the bulk of economic activity.

Ransomware cyberattacks and internet crimes have been rising at an alarming rate according to the FBI, threatening companies, government entities and individuals. Digital currencies, such as bitcoin, are the primary form of payment utilized for ransom and extortion cases since payments can be made anonymously and are not traceable. The FBI encourages individuals, especially elders, to be aware of numerous online scams and phone calls by visiting its Common Scams & Crimes site https://www.fbi.gov/scams-and-safety/common-scams-and-crimes.

Escalating inflation concerns prompted Federal Reserve members to consider limiting purchases of Treasury and mortgage bonds, which is an indirect method of raising interest rates. The reduction in stimulus efforts, also known as tapering, last occurred in 2013.

The administration released a proposed $6 trillion federal budget for the upcoming fiscal year, expected to be funded by higher taxes for top earners and corporations. Analysts, as well as nonpartisan analysis, expect additional issuance of Treasury debt in order to help fund ongoing federal deficits.

Various states are ending supplemental unemployment benefits which were instituted during the early months of the pandemic last year. It is estimated that 3.7 million unemployed recipients will be affected. Some states eliminating unemployment benefits are instead offering financial incentives for individuals to find a job. The Department of Labor’s most recent data reveal that there were over 8 million unfilled job openings at the end of March, the largest number of openings since November 2018.

The upward trajectory of home prices has made it less affordable for many to purchase, forcing some would-be home buyers to rent instead. Rising home values have resulted in rising rent costs nationwide, as lacking home supplies have spurred demand for rentals.An increase in travel has spurred higher fuel costs for airlines and automobiles as pent up demand and the summer months propel prices higher. The average cost for a gallon of regular gasoline rose above $3 per gallon nationally in May, the highest since 2014. Crude oil prices, which directly affect the price of gasoline, have risen over 80% in the past year. (Sources: FBI, Federal Reserve, EIA, Dept. of Labor)

 
the eia forecasts consumers will spend 31% more on gasoline this summer

Inflationary Pressures Affect Equities – Equity Market Update

Inflation pressures have been a minimal hindrance on the equity markets thus far, as many companies are passing along higher production and material costs to customers while still maintaining margins.

International equity markets, including developed and emerging, are recapturing momentum lost during the pandemic, elevating returns comparable to those in the U.S. markets.

Sectors leading the S&P 500 Index in May include energy, financials, industrials, and materials, representative of economic expansion as deemed by economists and analysts. Expansion in these sectors tend to influence other sectors as growth dynamics transition from industry to industry. (Sources: S&P, Bloomberg)

Fed Tapering is Concerning Bond Markets – Fixed Income Market

Comments by Federal Reserve members are hinting that the Fed is considering pulling back on Treasury and mortgage bond purchases, which is known as tapering. The last time the Fed slowed stimulus or pulled back on quantitative easing (QE), was in 2013, resulting in a so-called “taper tantrum.”

A curtailment in stimulus efforts by the Fed is expected to eventually result in rising bond yields, higher mortgage rates and increased loan expenses for consumers. Historically, rising interest rates have been the Fed’s most useful tool in mitigating inflationary pressures, which has recently become a focal point for the Fed. (Sources: Federal Reserve, U.S. Treasury)

Travel Picks Up – Travel & Leisure

The proliferation of vaccinations, along with pent up demand for travel has driven Americans to finally leave home and head out. The Transportation Security Administration (TSA) essentially tracks and counts every traveler passing through a TSA security checkpoint in every airport nationwide. The compiled data over the past year shows a dramatic downturn in travel in May 2020 with just over 176,000 daily travelers versus 1,500,000 daily travelers in May 2021.

Airlines, car rental agencies, restaurants, and hotels tend to benefit the most with an uptick in travel, which has been nearly dormant for the past year. The increase in travel also creates new jobs for the hospitality and travel industries, which were severely hit during the height of the pandemic.

The U.S. Energy Information Administration (EIA) is expecting U.S. highway travel to rise by 15% this summer, from last summer.The EIA also forecasts that consumers will increase their spending on motor gasoline by about 31% this summer due to increased travel as the pandemic subsides.

Source: https://www.tsa.gov/coronavirus/passenger-throughput, EIA

 
gasoline rose roughly 50% over the past year

How Inflation Creeps Up On Consumers – Consumer Behavior

Over the past year, global economies went from a slow expansion at the beginning of 2020, to an abrupt halt with the onset of the pandemic in March 2020. Supply chain bottlenecks have become rampant as increasing demand has evolved from a slowly recovering global economy. Historically, rising producer prices have been a predecessor to consumer inflation when manufacturers and distributors pass along the higher cost of materials and labor to consumers in the form of higher retail prices. A lack of critical components for everything from automobiles to cellular phones brought about production shortages that led to decreases in supply simultaneously as demand fell across the globe. As demand has begun to rekindle, shuttered factories and supply chains have not been able to keep up with rising demand, resulting in order backlogs and higher prices. (Source: Bureau of Economic Analysis)

USPS Struggling – Government Agency Overview

The United States Postal Service (USPS) remains an integral part of the economy and the country’s infrastructure even as the popularity of electronic payments and digital transactions have dramatically reduced the volume of mail processed by the USPS.

Of the more than 129 billion pieces of mail delivered in 2020, the most widely used service of the USPS is its first class mail service. As the volume of all mail has been dwindling, so has first class mail, falling from over 103 billion pieces in 2000 to just over 52 billion pieces in 2020, roughly a 50% drop in twenty years. There have been numerous rate increases over the years, with the most recent rate increase up to 55 cents for a 1 ounce letter in January 2019.

Source: USPS

 
grandparents can contribute up to $15,000 per year per grandchild

What To Do With That Unused Travel Budget – Financial Planning

As millions of Americans stayed home during the pandemic and traveled nowhere as hotels, resorts, and restaurants closed, budgets created for travel and vacation went idle. Many are still deterred, if not discouraged, to travel in fear of another virus outbreak or simply out of paranoia. Travel has become a bit more complicated and burdensome, especially for the elderly who just don’t travel as easily as during their younger years.

With inflation the topic of concern, higher educational costs are an issue for recent grads. A consideration might be to migrate some of the idle funds in the travel budget to a grandchild’s college saving’s plan, such as a 529. Named after the IRS Code it falls under, Section 529 plans have amassed over $425 billion in assets since their inception in 1997. Their popularity soared over the years as parents and grandparents realized their favorable tax benefits while also saving for college expenses. These plans offer two primary benefits: assets grow tax deferred and come out tax free for qualified expenses; and, contributions made by parents and grandparents are considered a gift, thus proving a tax benefit for some contributors. Over the years, both wealthy and lower-income parents and grandparents have been the main contributors to these plans.

Any parent or grandparent can make gifts of up to $15,000 per year per individual person (child) and to as many individuals as they wish. Section 529 plans allow gifts to be made five years ahead all at once. Thus, a grandparent can gift $75,000 per grandchild at once for the next five years. If the grandparent has five grandchildren, then they have the ability to contribute $375,000 at once to the 529 plans, which are considered gifts. There would be no gift tax, assuming no other gifts were made to that child over those years. This is a strategy for parents and grandparents that may have estates valued at over $11.7 million, the current federal estate tax exemption level. (Source: www.irs.gov/businesses/small-businesses-self-employed/estate-tax)

Job Openings Surpass 8 Million – Labor Market Update

A growing demand for workers by eager companies to fill positions nationwide has led to unfilled job openings exceeding 8 million as of the end of March, according to the most recent data available from the Department of Labor. Economists and analysts believe that generous unemployment benefits along with stimulus payments have discouraged many of the unemployed from returning to work. Lower paying job positions are the toughest to fill as unemployment payments equal if not exceed regular pay. Various occupations in manufacturing, hospitality, transportation, and food services have seen the largest growth in openings since the pandemic began in March 2020. Some companies have announced higher wages and increased hourly pay in order to entice workers, yet still struggle to fill open positions. (Source: BLS)