Second Quarter, 2021

Comments & Opinions

A year ago at the end of the Second Quarter of 2020, we were in an economic and social lockdown brought on by the Covid-19 pandemic.  The US and most of the world were under severe restrictions.  It’s been a long year.  Now, due to the availability of Covid-19 vaccines and behavioral changes in society, we have witnessed strong rebounds in the US and global economies along with lessening of social restrictions. 

US equity benchmarks closed the first half of 2021 at or near record highs as the economy reopened and more people returned to work.  The S&P 500 ended the first half of the year up 15.2%, the DJIA was up 13.8%, and the NASDAQ Composite finished the first half of the year up 12.9%.  Historic fiscal and monetary stimulus has provided a consistent tailwind since the Spring of 2020, and there is little evidence those efforts will be removed anytime soon. Source: July 1, 2021

Going forward, we believe the main challenges for the economic recovery may be the spike in the highly contagious Covid-19 Delta variant and the possibility of new restrictions, continuing inflation for products and services across the board, and the Federal Reserve’s response to these inflationary pressures.  The question of whether price increases are “transitory” or long-term is yet to be seen. 

Fed Chairman Powell stated on July 27th, that inflation will likely remain elevated in the coming months before moderating.  He also said the Fed will not raise rates or begin tapering the purchase of Treasury and mortgage bonds that provide stimulus to the economy until they see “substantial further progress” toward their goal of low unemployment and stable inflation. Source:  Wall Street Journal, 07/28/2021

We recommend a review of your investment portfolio and financial plan to determine if any adjustments are needed for your short-term and long-term goals.  Please call our office to schedule a meeting at 508-240-0320.


What, Why, When?

Inflation can be defined as the rise in prices for goods and services and the decline in the purchasing power of money.  Three of the main reasons that contribute to inflation are an increase in the money supply, the resulting decline in the value of the Dollar, and a disruption in the supply chain for goods and services.  All three of these have occurred since the beginning stages of the pandemic.

The Federal government and the Federal Reserve rapidly infused the economy with stimulus money.  Trillions of dollars were printed to provide individuals and businesses with money to keep the economy functioning and the Federal Reserve began purchasing assets in order to inject liquidity into the economy.

A large, rapid increase in the money supply reduces the value of each dollar and therefore, the cost of goods goes up. Companies pay more for their supplies and they pass the cost on to the consumer.

Production of goods slowed during the pandemic due to employees becoming ill and wide-reaching economic shutdowns.   Supply chains for imports, especially from China, were disrupted and this significantly impacted the price and availability of goods.  

Too much money chasing too few goods = Inflation


Tel:  (508) 240-0320      FAX:  (508) 240-2309

Securities offered through National Securities Corporation, member FINRA/SIPC.  Advisory services offered through National Asset Management, an SEC registered investment advisor.  Fixed Insurance Products offered through National Insurance Corporation.  Investing involves risk including loss of principal. The information provided is not directed at any investor or category of investors and is provided solely as general information about products and services or to otherwise provide general investment education. None of the information provided should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither National Securities nor its affiliates are undertaking to provide you with investment advice or recommendations of any kind.