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Key Points for the Week

  • The S&P 500 climbed 8.5% in the second quarter and has now risen 16.7% over the last year.
  • The U.S. economy added 850,000 jobs in June, beating expectations of 700,000.
  • Average hourly earnings rose a moderate 0.3% last month.

The Economist developed the Global Normalcy Index (GNI) to measure the post-pandemic return to normal. In March 2020, the GNI was 35 overall, with 100 being the normal pre-pandemic level. At the end of the second quarter, the worldwide GNI was 66, which means that almost half of the decrease has now been recovered.

Activity in the United States has been recovering faster than in other nations. The U.S. GNI was 72.8 on June 30. However, recovery in the U.S. has been uneven. For instance:

Employment is improving, but more slowly than anticipated. Last week’s jobs report showed a better-than-expected gain of 850,000 jobs in June. However, April and May jobs reports were below economists’ expectations, reported Randall Forsyth of Barron’s. In June, the unemployment rate was 5.9 percent, which is an improvement from the double-digit pandemic unemployment rate, but above the pre-pandemic level of 3.5 percent.

Employers are having trouble filling positions. Despite the fact that 9.3 million people remain out of work, trucking companies, airlines, restaurants, hotels, shipyards, factories, banks and other employers report having difficulty filling open positions, reported Julia Horowitz of CNN News.

In a Barron’s commentary, Suzanne Clark, the CEO of the U.S. Chamber of Commerce, stated that solving the worker shortage should be the nation’s top priority. She suggested expanding access to childcare, supporting employer-led skills training, ending supplemental unemployment benefits, welcoming global talent and prioritizing second-chance hiring.

Workers are leaving jobs. Hidden among the employment data was a surprising trend that some have dubbed ‘The Great Resignation.’ In June, 942,000 Americans – 9.9 percent of those who were unemployed – were job leavers. They had resigned from their jobs. For comparison, the number of people leaving jobs during the entire second quarter of 2019 was 809,000.

As pandemic life recedes in the U.S., people are leaving their jobs in search of more money, more flexibility and more happiness. Many are rethinking what work means to them, how they are valued, and how they spend their time.

Andrea Hsu, NPR

Prices are rising more quickly than anticipated. Anyone who shopped for groceries for a Fourth of July barbecue or made an above-asking-price offer for a house (and waived the inspection), knows that prices have moved higher.

Core Personal Consumption Expenditures (PCE without food or energy), which is the Fed’s favored measure for inflation, rose steadily during the second quarter. In May, core PCE was up 3.4 percent. When food and energy were included, PCE was up 3.9 percent.

Inflation concerns consumers. Consumer sentiment was up year-over-year from May 2020 to May 2021. However, inflation dampened sentiment and expectations declined from April 2021 to May 2021, according to the University of Michigan’s Surveys of Consumers.

Twice as many consumers expected that the inflation rate would be 5% or more in the year-ahead rather than 2% or below (44% versus 22%). Importantly, consumers still anticipated declining inflation over the longer term.

Richard Curtin, Director of Surveys

The Delta variant is a wild card. At the end of last week, about 182 million Americans (64 percent of the population age 12 or older) had received at least one dose of a COVID-19 vaccine, and 157 million were fully vaccinated (55 percent of the population age 12 or older), per the Centers for Disease Control and Prevention. That helped reduce the number of COVID-19 cases and deaths, so the country could begin to move back toward ‘normal.’

Last week, the number of coronavirus cases in the U.S. began to creep higher as the highly contagious Delta variant spread. It was responsible for about 20 percent of new U.S. cases. It is normal for viruses to mutate. For a virus to survive it needs to mutate in a way that increases its ability to infect. This increased ability to infect is referred to as transmissibilty.

The CDC has adopted a naming convention using the Greek alphabet to name each noteworthy mutation. Not every mutation is named and recorded. The CDC only names “variants of concern”. “Delta” is the fourth letter of that alphabet. This means that it is the fourth mutation that is a variant of concern.

Tanya Lewis of Scientific American reported, “Several experts said they do not expect the Delta variant to cause a nationwide surge here in the U.S. like the one that occurred last winter. But they do anticipate localized outbreaks in places where vaccination rates remain low.”

U.S. equity markets continued to move higher during the second quarter. The Standard & Poor’s 500 Index, “…gained 8.2% during the second quarter of 2021, its fifth consecutive quarterly gain, which is the longest streak since the fourth quarter of 2017. Its first-half gain of 14.4% was the best since 2019 and the second-best since 1998,” reported Ben Levisohn of Barron’s.

This Week in the Markets

U.S. payrolls jumped 850,000 in June after two months of mediocre hiring. With these gains, the private sector has now reinstated 73% of the jobs lost during the pandemic. Restaurants and hotels led the hiring, as the leisure and hospitality industry added 343,000 new positions.

Concerns about inflation dipped when average hourly earnings rose 0.3% last month. Wages are 3.6% higher than a year ago, which is only just above the 3-3.5% trend prior to the pandemic.

Stocks surged again last week and wrapped up a profitable quarter. The S&P 500, MSCI ACWI, and Bloomberg BarCap Aggregate Bond Index all gained. The S&P 500 picked up 8.5% during the quarter and is now 16.7% higher, which includes gains made during the first days of the third quarter.

Fundamentals will take center stage in coming weeks as companies begin to report quarterly earnings. Earnings are expected to leap 63.6% from depressed figures during last year’s lockdowns.

The Housing Market Boom

Low mortgage rates, high demand for homes and a limited supply of existing homes have pushed the cost of housing through the roof. In May, U.S. home prices were 23.6 percent higher than they were a year ago. The median sale price for an existing home was $350,300, and properties were selling at a rapid clip. Sales were constrained primarily by a lack of inventory and reduced affordability, reported the National Association of Realtors (NAR).

Housing prices are higher around the globe. Sweden, Denmark, Russia, Canada, South Korea, Taiwan, the United Kingdom, and other nations have seen home prices increase, too, reported Delphine Strauss and Colby Smith of the Financial Times.

While high demand and rising prices are good for homeowners, the phenomenon has economists and policymakers worried. “…The runaway market holds two concerns…First, prices could spiral into bubble territory, making economies vulnerable to a sudden market correction that would hit household wealth…Second, home ownership could become even more unaffordable for young people and key workers who were already priced out of many areas before the pandemic — entrenching inequalities between generations…”


Predicting how the U.S. economy will recover requires objective and subjective analysis of the data. Based on last month’s job data, it looks like the economy is making up for lost time, after falling short the last couple months. June payrolls rose 850,000, surpassing expectations of 700,000. June’s gains were roughly equal to the gains in the previous two months combined.

The jobs returning to the economy were in locations one would expect: restaurants and hotels. More Americans are venturing out on vacations and eating in restaurants. Even when seasonal hiring trends are eliminated, the leisure and hospitality industry still added 343,000 jobs. Those gains accounted for 40% of the overall increase. More states and cities reopening were big contributors to the gains.

The jobs market isn’t the only place the country is experiencing gains. The S&P 500 rose 8.5% in the second quarter, adding to solid gains from the first quarter. Counting the 0.5% increase early in the third quarter, the S&P 500 is 16.7% higher this year.

During the first half of the year, the S&P 500 moved more than 1% in either direction 30 times. Only 10 of the 30 moves were negative. While the S&P 500 dropped more than 30% during the initial stages of COVID-19 last year, it has since rallied sharply and recorded several new highs.

Prior to COVID-19, the U.S. stock market had gone the longest period ever recorded without a decline of 20%. The S&P 500 dropped more than 30% during the early days of the pandemic. There are now numerous predictions of another stock market crash. The reasons are as varied as the prognosticators.

Although past performance and history are not a prediction of what might happen in the future, we have gone through multiple market drops in the past. In fact, a 10% drop is considered by many to be part of the normal process. More than 20% becomes a bear market and more than that is sometimes referred to as a crash.

Since 1926, a span of 90 years, the stock market has declined by over 15% in only six years: 1930, 1931, 1937, 1974, 2002, 2008. There have also been years where the stock market fell by more than 15% during the year but ended up losing less than 15% for the year or even being positive for the year, like 1987 and 2020.

If you are concerned about a potential drop in the market, and its impact on your portfolio and / or goals, then please reach out to your Advisor.

Delays in Tax Refunds

The Taxpayer Advocate Service (TAS) has stated that it is aware that taxpayers are experiencing more refund delays this year than usual. Typically, the IRS processes electronic returns and pays refunds within 21 days of receipt. However, the high-volume of 2020 tax returns being filed daily, backlog of unprocessed 2019 paper tax returns, IRS resource issues, and technology problems are causing delays. Once a return is processed by the IRS and loaded onto the agency's systems, TAS may be able to assist with delayed refunds if taxpayers meet case acceptance criteria. TAS has a case criteria tool that can be used to determine if TAS may be able to offer assistance.

Be Aware of Text Message Scam

The IRS and Security Summit have issued a warning regarding a new text message scam which cites the availability of an economic impact payment. The goal is to have the recipient reveal bank account details. If you have any questions about this scam, please contact us.

Did you Know? This Week in History

July 8, 1951: Paris Celebrates 2,000th Birthday

On July 8, 1951, Paris, the capital city of France, celebrated turning 2,000 years old. Also, known as the City of Lights, it is generally considered as being founded around 250 B.C.

During the French Renaissance period, from the late 15th century to the early 17th century, Paris became a center of art, architecture, and science. In the 1860s, an artistic movement known as the French Impression emerged, featuring the work of a group of Paris-based artists that included Claude Monet and Pierre-Auguste Renoir.

Today, Paris is home to over 2 million residents, with an additional 10 million people living in the surrounding metropolitan area. The city retains its reputation as a center for food, fashion, commerce and culture.

Weekly Focus

If you are always trying to be normal, you will never know how amazing you can be.

Maya Angelou, Poet

Optimism is the one quality more associated with success and happiness than any other.

Brian Tracy, Motivational Speaker