Investors fear inflation, labor shortages in second half of 2021

  • by:
  • Source: Axios
  • 06/21/2021
Investors entered 2021 concerned about the transition to a new U.S. president, the form of new fiscal stimulus, the distribution of vaccines and the reopening of the economy. Now, top risks include supply chain bottlenecks, labor shortages, inflation and slower GDP growth.

Why it matters: Stocks have rallied almost unabated for over a year, leaving many to wonder if the market is overdue for a big selloff. Last week's declines amplify those concerns.

Catch up quick: The transition to a new president was anything but smooth, but it happened. Fiscal stimulus has been passed, vaccines are being administered widely and the U.S. economy has been surging.

What to watch: There are two big dynamics to monitor in the second half, Credit Suisse strategist Jonathan Golub tells Axios.
 
  • First, how long does the demand for goods and services outstrip supply, keeping inflation hot?
  • And second, what is the path to a more normal pace of growth?
  • Persistent inflation and a disorderly slowdown are a recipe for market volatility.
What they’re saying: With the S&P 500 near its all-time high of 4,257, strategists have noticeably diverse views on what’s next.
 
  • Credit Suisse's Golub is bullish, predicting the S&P will rally to 4,600 by year-end amid what he calls a “benign deceleration” in growth. That's where the economy cools to modest-but-healthy growth and the market generates modest-but-healthy returns.
  • RBC strategist Lori Calvasina is more cautious, telling Axios she sees "a little more room for stocks to move up but not a lot." We could see "a meaningful pullback during the second half, amounting to as much as 8%-9%," she says. 
  • Among other things, Calvasina cautions that measures of investor sentiment and positioning are at levels that signal the market has peaked — and is about to slide.
BofA strategist Savita Subramanian supplies the more bearish take. She thinks the S&P will fall to 3,800 by year-end. 
 
  • Similar to Calvasina, she warns in a research note that investor sentiment is near-euphoric, but also notes wage inflation and potential tax hikes could hurt earnings. 
The bottom line: "The stock market is not in a place where it can absorb bad news," Calvasina says. 
 
Inflation by Paul VanDerWerf is licensed under flickr Attribution 2.0 Generic (CC BY 2.0)

Help FAIRtax Become The Number One Issue in 2024

Enacting the FAIRtax must be a prominent topic in these times. We did it before, we can do it again, but we need your help!

Help out with a One-Time Contribution

Your gift of $25, $50, $100 – even $1,000 or more if you can possibly spare it – will help FAIRtax.org bring an end to the IRS and promote a FAIRtax. So, I urge you, please give as generously as you can.

Billing information (REQUIRED)

Payment information (REQUIRED)

To donate by check:
Americans for Fair Taxation
PO Box 4929
Clearwater, FL 33758

If you need to make changes to your existing Monthly Re-Occurring Donation with new card or billing address information, then Please call Adam Yomtov our New York State Co-Director. He is assisting with the administration of our donations, technology services, and website.

Please note: Inputting your new information at our website won't update your donation. The only way to update is by calling Adam Yomtov 917-689-3931 mobile.


Americans for Fair Taxation® is a 501(c)(4) non-profit, non-partisan grassroots organization solely dedicated to replacing the current income tax system with a fair, simple and transparent national consumption tax – the FAIRtax® Plan. We rely entirely on contributions from concerned citizens like you who want a tax system that will generate jobs and stimulate the economy. Welcome to the FAIRtax team!

Connect

Share