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Weekly Market Recap: May 3, 2021

The week in review

  • PCE inflation +1.8% y/y
  • U.S. household income +21.1% m/m

The week ahead

  • ISM Manufacturing PMI
  • Unemployment rate

Thought of the week

The U.S. economy, as measured by real GDP, accelerated in 1Q21, recording an annualized increase of 6.4%. Almost a year removed from the 2Q20 contraction of -31.4%, it is clear that the economy is in the midst of a swift, consumer-driven recovery; this latest reading is the third consecutive quarter of above-trend growth, following strong GDP prints in 3Q20 (+33.4%) and 4Q20 (+4.3%). Under the hood, 1Q21 personal consumption expenditures rose at a SAAR of 10.7% with the goods and services components up 23.6% and 4.6%, respectively. Strength in the services sector was driven by increasing vaccinations and gradual return to normalcy, as evidenced by solid q/q growth in air transportation (+11.5%), accommodations (+9.5%) and food services (+5.8%). Recent market performance has also been stellar, with the S&P 500 and NASDAQ indices hitting record highs last week on the back of a blowout 1Q earnings season.

The quick rebound in the U.S. economy and equity market has directed increased attention to the Fed. For now, the Fed remains accommodative, electing at the most recent FOMC meeting to once again not adjust the target federal funds rate and reaffirming its commitment to asset purchases until “substantial further progress is made.” However, Chair Powell did highlight the vaccination campaign and fiscal stimulus as the primary drivers of the recovery and even noted improvements in the sectors hardest hit by the pandemic. As a result, with the backdrop of a robust recovery, investors should be positioned for higher yields as strong growth and higher inflation are realized in the quarters to come.

gdp growth

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Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

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