(New York)

Last week's jobs report was disappointing, to say the least, but bond market investors want to know what exactly this means for the recovery: Is this a blip or are we headed for a weakening recovery? Markets are signaling that it could be a slower tightening than they initially might have expected but upcoming data will help investors solidify their response. Job’s Openings and Labor turnover survey (jolts) will tell investors if there is a labor market slump. CPI inflation numbers on food and energy will tell investors how big the labor market spillover troubles are. Additionally, real average hourly earnings are included in this report to be released Wednesday. Finally, retail sales data is released for April on Friday. Growth is expected to slow already but the additional slowdown could be a warning.

FINSUM: These data releases are critical for not only what the bond market sees but what the Fed sees as well. If economic data slows this could change the cadence of the recovery and QE.

(New York)

May 12th was one of the key market moments of 2021. All eyes were on new inflation data that would make or break the market. The result was a definitive “break”. Inflation came in hot, with the reading measuring 4.2%, well over already high expectations of 3.6%. Markets took a pounding, with the Nasdaq leading the day’s losses in a 2.7% fall. The Dow and the S&P 500 also fell sharply.

FINSUM: We are now in the middle of another market tantrum. It is critical to ask oneself why inflation is so troubling. The reason the market is losing is because of higher rates’ effect on tech stock valuations, but even more importantly, the timeline for the Fed’s taper. But if you can put that aside, what is actually happening is that economy is doing well, and earnings look likely to be great. We think investors should just ride out the storm.

(Beijing)

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