Trade reopens sends stocks to record highs, inflation spikes, infrastructure deal, euro hits wall at 1.1975
US stocks hit new highs after the Fed’s preferred inflation indicator peaked at 3.4% and on improving expectations the economy will benefit from infrastructure spending in the fall . The Fed’s key inflation indicator reached its highest levels since the early 1990s, with the reopening of the economy combined with the base effects of the entire shutdown of last year. The monthly PCE reading, however, fell and fell below economists’ forecasts. Today’s inflation data was another vote of confidence for inflation is the transitional camp.
Investors are paying close attention to cuts in income and spending that have been larger than expected as the effect of stimulus payments wears off. The US economy is on solid footing and could continue to push stocks higher as the reopening momentum picks up and hiring improves.
Investors have passed the Biden administration’s bipartisan infrastructure bill which still has an uncertain way forward. The goal is to do this before the August holidays, but late September or early October is probably more realistic. The traditional $ 579 billion infrastructure deal will invest in road construction, bridge repairs, energy grid and high-speed internet, without a gas tax or cancellation of tax cuts Trump. The human infrastructure bill, which is still the subject of much debate, will not be linked to the bipartisan bill. The tax increases will eventually happen once the second bill is negotiated.
The euro rallied after confidence data in Europe improved sharply as the economy gradually opened up. GfK’s forward-looking confidence indicator reached -0.3, the highest level since August. The recovery in Europe continues to grow and this could continue to be the case as policymakers show signs to refrain from premature tightening.
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