A few weeks ago we were honored to have longtime sports personality Patrick Reusse join us for our monthly Lunch & Learn. Not only did he provide his thoughts on the Vikings upcoming season, but he also shared some stories including one of how the late Sid Hartman was able to track him down in a pasture in Prior Lake back in 1963 when a young Mr. Reusse thought he would skip work on a nice summer’s day. While many of us maybe have had thoughts of skipping work when the weather is nice, the financial markets do not take summer breaks but they often slow down. Fortunately, this year was a little different as the stock market did not show signs of slowing and continued its steady march upward. However, now that we are past Labor Day, which marks the unofficial end to summer, it seems some changes are beginning to occur.
The S&P 500 reached 53 new highs year-to-date through the end of August, which is the most ever through the first eight months of a year. September has gotten off to a rocky start with the markets being slightly more volatile and not continuously providing the gains we had become accustomed to (and spoiled with) over the past few months. Some of the culprits being blamed for this change in market activity include the withdrawal from Afghanistan, damage from Hurricane Ida, and continued concerns about Covid’s prolonged impact. While we are mindful of these events, we are more focused on those factors which we think will have longer term impacts including a potential slowdown in economic growth, changes in Fed policy and impending spending bills in Congress. As we have been anticipating for a while, a lot of market action could occur over the next month so we expect volatility to continue.
Last week’s major economic release was the Producer Price Index (PPI) which measures prices of goods at the producer level before they are passed along to the final consumers. An increase in PPI will most likely lead to an increase in consumer prices, as measured by the Consumer Price Index (CPI). The year-over-year change in the PPI is the highest since this measure began being kept in 2010 and the fact it has been accelerating over the past few months indicates inflationary pressures will continue to persist.
We currently view inflation as being a very substantial risk to long-term investor’s portfolios since it has potential to erode purchasing power, having an especially profound impact on retirement savers. This is why it is vital you have an income plan in place that takes into account inflation and invest in assets which benefit from higher prices.
On the economic front this week, we will receive further inflation figures with the Consumer Price Index (CPI) which will garner a great deal of attention in light of last week’s PPI data and fact that inflationary pressure no longer appears to be transitory from the pandemic. Also due to be released are retail sales numbers from August, which are expected to fall slightly due to concerns with the Delta variant and the anticipation of stimulus payments ending. Retail sales are a strong driver of the U.S. economy and an indicator of future spending so a significant surprise in either direction has the potential to move the markets.
If you missed seeing Patrick Reusse in our office and want to hear the stories he shared or his insights into the local sports teams, you can watch the replay on the Secured Retirement YouTube channel. Even with summer winding down and fall sports seasons starting, we remain focused on watching the markets and economy so we can best position portfolios and keep our clients informed.
Have a wonderful week!
Nathan Zeller, CFA, CFP®
Chief Investment Strategist
Please contact us if you would like to review your individual financial plan or learn how the TaxSmart™ Retirement Program can help you.
Office phone # (952) 460-3260