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About the blog

Markets and Economy

Nationwide’s Chief of Investment Research and the Nationwide Economics team offer daily and weekly commentary and analysis of the equity and bond markets, including an overview of economic data being released, global market news, commodities and market performance by index returns. These timely insights can help you navigate markets and understand emerging trends.

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Capital Market Impact

Markets remain reactionary to Fed policy

The S&P 500® Index fell 2% last week after closing at a record high the previous week on incremental hawkishness from the Federal Reserve. The Dow had its worst week since October at -4%, while the NASDAQ was little changed. Investors quickly began to price in a peak in Fed dovishness, along with the reflation trade and economic growth. Technology and growth names were resilient, with notable weakness in commodities, financials, and cyclicals. 

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Economic Commentary

Supply-side constraints are having an impact

Retail sales declined by 1.3 percent for May as topline spending was again weaker than expected. But there were significant upward revisions to March and April that point to a stronger trend pace of expenditures – and perhaps to upward revisions for the May data, as well. A pickup in spending at restaurants and clothing stores was likely influenced by the fuller reopening of in-person activities across the country. Despite May’s decease, retail sales were still up by more than 28 percent over the past year and have far surpassed pre-COVID levels on the back of the successive stimulus payments this year.  

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Economic Commentary

Economy is strong, despite supply issues

Economic data were strong for May, although mostly below expectations. Demand is robust throughout the economy, but many industries have been limited on the supply side. For example, job openings are at an all-time high, but employers are having trouble filling them; orders are rising rapidly for both manufacturing and service industries, but so are delays in supplier deliveries; and house prices are soaring in part due to record-low supply. Even very strong light vehicle sales are now being held back by computer chip shortages. While efforts are being made by employers and state governments to bring workers back into the labor market, other supply issues may take longer to resolve. 

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Capital Market Impact

The S&P 500 hits record high despite surging inflation

Technology and other growth sectors have reemerged as the market leaders, with the NASDAQ less than 1% below a record high and showing gains in four straight weeks. This shift is seen as a reaction to lower interest rates, improving valuations and the likely peak in earnings growth in the next few quarters have many predicting a resurgence of the growth leadership that drove much of the post-financial crisis bull market and a stall in the pro-cyclical “reopening” trade. 

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Economic Commentary

Inflation spike likely at its peak

The consumer price index (CPI) rose more sharply than expected for May, up by 0.6 percent, although this was down from April’s torrid pace. The May increase pushed up the year-over-year trend rate to 5.0 percent, the fastest since August 2008. The core CPI also climbed sharply, but again by less than in April, increasing by 0.7 percent to raise year-over-year core inflation to the highest rate in nearly 30 years at 3.8 percent. 

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