Almost there as the S&P 500 looks to be finishing a consolidation period that began in early April. These periods of sideways price action typically foreshadow higher prices and we may have had a good start on Friday. A close above the previous high at 4240 next week will likely kick-off another leg higher and set the tone for the summer.
Global trade is recovering as companies rush to meet demand but are challenged by supply channels that are not 100%. Inflation is the byproduct and should continue until equilibrium is established which may take us in 2022. In the meantime, I expect that we will continue to see higher commodities prices and shortages in certain sectors like semiconductors. The byproduct of this uneven comeback is that central banks will be slow to change accommodative policies so the punch bowl for equities will continue.
Chart of the Week!
Bitcoin uses more electricity per year than most countries which roughly amounts to 0.65% of worldwide electricity consumption. A comparison by Visual Capitalist also shows that it also consumes far more power than the world’s largest technology companies. Crazy!
Economic & Central Banking Snippets
- U.S. nonfarm payrolls increased by 559,000 in May and the unemployment rate dropped to 5.8%. The number of long-term unemployed persons fell by 431,000 to 3.8 million. All good signs that we are putting the pandemic in the rear-view mirror.
- The labor-force participation rate came in light at 61.6% which implies Americans are choosing not to work due to the enhanced pandemic unemployment benefits.
- Average hourly wages increased by $0.15 to $30.33 which says businesses are paying up to hire workers.
- Unemployment claims fell below 400k this week, signaling the labor market is making a turn for the better. Also, many states are moving to end the $300 a week extended jobless benefits to lure the unemployed into the workforce.
- The ISM services index rose to 64 from 62.7 which is a record high. All 18 industries surveyed saw growth in May. According to ISM: “The rate of expansion is very strong, as businesses have reopened and production capacity has increased.”
- The Fed’s balance sheet reaches a new record high and now totals $7.94 Trillion.
- The Group of Seven (G7) finance ministers are reportedly closing in on an agreement to push for a minimum global corporate rate of “at least 15%” in international tax negotiations. The U.S. wants to prevent corporate giants from creating foreign subsidiaries in countries with lower corporate tax rates. (Bloomberg)
- President Biden signaled that he was willing to sharply slash the price tag of his original $2.3T infrastructure proposal and would accept a narrower, $1 trillion package. (WSJ)
- Global food prices are rising to the highest levels in nearly a decade. The UN’s index of goods costs has spiked in the last year and rose 4.8% last month, the 12th straight month of increases. Droughts in Brazil are aggravating the problem, causing major crop shortfalls.
- The Southwest is America’s new factory hub. Arizona, New Mexico, Texas and Oklahoma have increased their manufacturing output more than any other region in the U.S. since 2016. Those states plus Nevada added more than 100,000 manufacturing jobs in three years, representing 30% of U.S. job growth in that sector and at roughly triple the national growth rate. Executives say the region’s growing population makes for plenty of available labor, and its lower cost of living is a draw for new talent. (WSJ)
- Cryptocurrency mining is booming in Argentina. In Argentina, crypto-miners are posting fat profits as they benefit from the country’s longstanding residential electricity subsidies. In Argentina, crypto-mining is being used as a way for investors to hedge against currency devaluations, defaults, hyperinflation, and now, a three-year recession made worse by the pandemic. (Bloomberg)
That is all for now and thank you for being a subscriber!
President – Kisco Capital