Unexpectedly Intriguing!
14 June 2021

Inflation ruled the headlines in the trading week ending on Friday, 11 June 2021. But perhaps the most surprising outcome of the higher than expected inflation data that came out on Thursday, 10 June 2021 was its the effect of the report on U.S. stock prices. They rose to close at new record highs after the Bureau of Labor Statistics' Consumer Price Index report for May 2021 became public.

Alternative Futures - S&P 500 - 2021Q2 - Standard Model (m=-5.0 from 11 May 2021) - Snapshot on 11 Jun 2021

From our perspective, the S&P 500 (Index: SPX) appears to be behaving consistently with investors focusing on the current quarter of 2021-Q2. That assessment assumes the amplification factor of the dividend futures-based model is -5, which may no longer be true. We are closely watching for indications that value has changed in response to the inflation report, where we don't yet have enough information to confirm a change. We may be revisiting this initial assessment as early as next week, because we're also on the cusp of when the focus of investors will be forced to shift to another point of time in the future, if it hasn't already.

The May 2021 inflation report is significant enough that we've gathered a range of analysis from investing professionals related to the main question it raises: Is it a short-term "transitory" affair or will it have long-lasting legs? Here's a short roundup of analysis on the "transitory" side of the argument:

Here are several arguments favoring the interpretation higher inflation will be with us for an undetermined time to come:

And one last take, from RaboBank, which considers both possibilities:

And you thought it was going to be a dull summer! Let's close by rounding up the market-moving headlines of which we took note during the week that was....

Monday, 7 June 2021
Tuesday, 8 June 2021
Wednesday, 9 June 2021
Thursday, 10 June 2021
Friday, 11 June 2021

Normally, we'd point to Barry Ritholtz' weekly succinct summation of his list of positives and negatives for the economy and markets at this point. Alas, he presented none of either this week!

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